I told you so

....read below about the October legislation changes and their effects. Then read what our benevolent Congressman are saying. Rep Paul Kanjorski sent over a letter to Secy Paulson basically saying, and we paraphrase here, "hey hank, the student loan industry is in the crapper, and students will be looking for FFELP loans here in a bit, and we may have problem on our hands....can you fix the problem?"

Ok, so lets recap once more: the House and Senate rush legislation through that contributes to the present situation where private lenders are absolutely not interested in providing FFELP loans. Granted, the liquidity crunch is effecting the situation as well, but let's not be naive: the very legislation that these Congressman crafted certainly takes a great deal of the blame here.

We just don't see what the Dept of Treasury can do to fix the situation. Lenders don't want to participate in the FFELP industry because it's not profitable anymore -- it's a law now. It's funny that for-profit companies are driven by their ability to make profits. And funnier when the legislative landscape is such that when private lenders can't make money, they withdraw from that industry. Actually, it's not really that funny, but it is a fact. And to be sure, this is a fact that was plainly repeated to our benevolent legislators. Apparently everybody thought the private lenders were merely crying wolf when they said: "if you pass this law.....we'll take our marbles and go home!"

Well, participants in the FFELP industry did go home with their marbles, just like they said they would do. And now the legislators are employing an amazing act of foresight and trying to fix the problem before they look silly this summer when their constituents go looking for guaranteed student loans and will be told: "Sorry, your Congressman fixed it so we can't and won't give you any money."

But wait, the Henry D. Ford Direct Loan program is there. The Direct Loan program will save the day! Nope, that won't happen. The federal government just isn't a financial intermediary. There is no incentive for the Direct Loan program to perform optimally. Not to mention the burden the Direct Loan program puts on a university's financial aid office. Suddenly, the financial aid office must begin processing and tracking loan applications and loan disbursements. We're hearing an earful from a number of very large university's that they don't want anything to do with Direct Lending because, well, they're a university, and not a loan processing outfit.

Sadly, the victim in all this will be the student. The ability of students to obtain low cost loans to attend college will be denied to thousands of applicants. The private lenders have been forced out of the business. All because an ill-conceived, knee-jerk reaction to a problem that wasn't the lenders fault.