Substantiating an earlier claim

We're still not journalists, but want to be thorough about quoting statistics and facts. In fact, we're now even more passionate about the claims made in the Worchester Telegraph.

Where the editorial staff allowed a statistics to be rambled off that Direct Loans costs $6 less per $100 of funded loans then FFEL loans. Ha! That's a splash in the bucket compared to the comparison of default rates from the two programs. According to the 2008 Federal Budget Appendix (page 337 of the appendix) the Direct Loan program will experience 16.65% of defaulted loans in 2007....while the FFEL program will experience 11.70% of defaulted loans.

That's beyond a significant difference. It tells us that the private bank/lender is far more appreciative of the student loan asset than the government. To us, processing and disbursing a loan is just a small cost. Where the lender makes money is by borrowing money to fund the loan cheaper than the rate earned on the loan....all this is contingent on managing the asset and ensuring that defaults are kept to a minimum. There just isn't an incentive for our benevolent government to assume that responsibility. Trust us, a private bank/lender watches the default rates on their loan portfolios like the Geraldo is watching the Anna Nichole Smith trial.

In fact, we're sufficiently motivated to make a really bold statement: With default rates projected to be 42% higher in the Direct Loan program, the government should consider shutting the Direct Loan program down. It just doesn't work with those loss figures. We welcome a healthy dialog on the argument, but just don't think there's any ammunition you can serve our way to change our minds.