We got the exclusive unconfirmed NSLDS update right here.

First off....the Department of Education axed access to NSLDS to everybody in the industry EXCEPT for institutions of higher education and student borrowers. We did get a tip that 15 schools lost their access during this NSLDS hiatus....don't know which schools those are.

This Tuesday, April 24, we heard that the servicer than exclusively handles the Direct Loan program got their access back. So perfect, the Direct Loan program is up and running.

But this is interesting: we hear that the Department is really focusing on the fully vertically integrated institutions. That's organizations that have an internal marketing front end, an internal financing vehicle, an internal guarantee agency, and an internal servicing function. There's not too many of these...examples include: Sallie Mae, AES/PHEAA, and Great Lakes....probably a few others, but those come to mind initially. But here's what we didn't know. The guarantee agency's get a full dump of NSLDS. The certification of the loan level guarantee requires a 360 view of the database. So, if an organization has a marketing front end in-house and a guarantee agency in-house, there's the opportunity for shennanigans theres. Not many shops are strucutred like this though.

Our snooping and nosing around also yielded that access will be fully up and running in 2-3 weeks. The Department is not notifying people when access is available.....just need to keep checking.

This is all unconfirmed rumor...this is the good stuff we eat up.

Here's how to fix NSLDS

NSLDS is a credit bureau. The Department of Education may have another view, but in terms of it's function and structure, that's exactly what it is. So let's take the credit bureau model and port it over to NSLDS. It will solve a tremendous amount of problems. Credit bureaus are regulated by the FTC, FCRA, FDCA, and whole host of other acronyms.

Let's start with how access IDs are handled for lenders/servicers/guarantors/etc. Right now each entity has a site administrator. They submit a form to request an individual employee's ID/password. that ID/password is associated with the site making the request. Then when that ID/password makes an inquiry, the inquiry is posted to the borrowers NSLDS record. In otherwords, there is a record of who made an inquiry, when then inquiry was made, and where the inquiry was made from. Furthermore, restrict access from the work site. Right now employees can use their ID/password off work premises to look up any individual.

Now, let's upgrade the web-only interface. Business's in the business of facilitating student loans want the loan data, not a graphical rendering of the data that must be manually reviewed. This will reduce costs for all involved (i.e. lower costs for borrowers as a result of a more efficient workflow).

Costs? Start requiring users to pay for access. That's how credit bureaus make money. Why can't the Dept of Education charge for access? This event alone will put a stop to any (if it exists) prospecting in NSLDS.

Dept of Education? Well, their mission is to see to it that the citizenery is educated. Why are they running a credit bureau? They shouldn't be. Turn this thing over to the experts: the bank regulators, the FTC, and let it be regulated by the Fair Credit Reporting Act, the Fair Debt Collections Act, and all the others. Sure it's a specialized beast dealing with student loan debt, and there's probably some involvement for the Department of Education, but they certainly shouldn't be running the NSLDS operation, regulating the NSLDS operation, or policing the NSLDS operation.

Tomorrow, we'll rant about a much bigger issue: The fact that the Department of Education is regulating a financial intermediary process. We've ranted about this before, but this time instead of just complaining, we'll provide some soluations as well.

We're just at a loss about the silliness today.

We just don't know what say about this. Sen Kennedy, in today's Huffington Post is making some leaps of logic that would make Sherlock Holmes roll over in his grave (if he weren't a fictional character).

Apparently the loan level guarantees that the government provides on FFELP loans "could and should be used to make college more affordable and debt more manageable." Well, OK. but the affordability of college is not a function of borrowing money. Affordability of college is a direct function of the tuition levels. Nevertheless, we should spank the financial intermediary function because tuition is so high.

In his rambling post, Kennedy, seems to imply that private education lenders charge too much money. OK....this is like telling a bank that they are charging too much money for an auto loan. Well, you know what? If the interest rate is too high, then don't take out the loan. You have a choice! Banks charge interest based on the ability to pay a loan back. If the credit underwriting is such that the borrower has a poor likelihood of repaying the loan, then that risk will be built into the cost to borrow the money. These decisions are all made systematically based on automated credit decisioning platforms.

To imply that banks are making too much money in FFELP and Private Ed lending is to imply that the free-market does not work. Sure, there are instances where the free-market hiccups and a benevolent government must step in to right the cart. But what we have here is hardly a tipped cart. We just have skyrocketing tuition.

We're curious to see how Sen. Kennedy proposes to fix the system. He can't possibly suggest that the Direct Loan program be the savior to all these problems! Using Holmesian logic, twisted a la Kennday, would lead to the conclusion that the government is better at building and operating a business than the open market ever could.