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Duncan pushes back against private lenders


“As a strong supporter of competition, I am disappointed in your actions to encourage this conversion when legislation has not yet become law,” Johanns said in the Nov. 3 letter. “Nebraska students and their families benefit from competition among student loan providers. That is why I strongly believe in the availability of private student loans and why Congress should make these decisions, not the administration.”

Johanns described ED’s move toward direct lending as a “hostile takeover of the student loan business.”

Sen. Lamar Alexander, R-Tenn., also protested Duncan’s letter to colleges last fall, calling the decision “premature.” Alexander said he was concerned that colleges and universities lacked the resources to handle the shift from private to federal loans.

Even Democrats have criticized the administration’s direct lending push. Sen. Evan Bayh, D-Ind., who announced Feb. 15 that he would not run for re-election this year, sent a letter to Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin on Wednesday saying SAFRA would threaten jobs in Indiana.

Sallie Mae operates offices in several Indiana towns and cities, and Bayh said switching to 100 percent federal student loans, while creating jobs in the long term, would hurt the state’s economy in the short term.

Making college affordable for low-and-middle income students is a priority for lawmakers, but “so is both creating new jobs and protecting those we have,” Bayh said in his letter.

Duncan said there are more than 2,300 campuses that offer direct lending, up from 1,000 in 2007.

Northwestern University is one of the latest schools to convert to direct lending. A Feb. 14 announcement said the move was in response to the slumping economy and impending changes in the way students receive college loans.

Northwestern said in its announcement this week that campus officials already were familiar with the software necessary for shifting to direct federal loans.

“Our knowledge of this software will ensure no disruption in the processing or the receipt of your loan funds for the 2010-11 year,” the university said in a message to students.

“We’ve seen this huge migration [away from private lending] over the past three years,” Duncan said during the conference call. “I think the choice is very, very clear.”

Links:

Federal student aid homepage

Northwestern University announcement