Head of Direct Student Loans Gives Bankers Fair Warning
Cope, Debra, American Banker
The Department of Education's experimental program to cut the banking middleman out of the student loan business isn't scheduled to get off the ground till July 1994.
But Larry Oxendine, the man in charge of launching it, says the new direct loan program will set high standards for efficiency and quality that its rivals will be hard pressed to match.
"We're essentially creating a bank with only one product: student loans," Mr. Oxendine last week told a workshop sponsored by the Consumer Bankers Association. Its members include banks that dominate the $13 billion-a-year guaranteed student loan program.
"Even if the direct loans are not the way we go in the long term, it's my hope that we can use this experiment to standardize guaranteed student loans," Mr. Oxendine added.
A Bid to Control Costs
Bankers had battled to block the direct loan pilot program, arguing that it put the government in competition with the private sector. But Congress, in an effort to control the soaring costs and high default rates of the guaranteed student loan program, approved the pilot program in July. It is expected to generate $750 million in loans during its first year. …