Should the Federal Family Education Loan (FFEL) program be mended or ended? That was the subject of debate at an event on Tuesday hosted by the New America Foundation's Education Policy Program.
On one side was Robert Shireman, a senior advisor at the U.S. Department of Education, who helped write the Obama administration's plan to sunset the FFEL program and use the savings to turn the Pell Grant program into a true entitlement for low-income students by financing it entirely through mandatory funding. The recent turmoil in the financial markets, he said, has exposed the risks that the federal government takes on by relying on private lenders to make government-backed loans to students. Without federal intervention, the whole program could have collapsed. "It's not a system that assures that the loans are actually made," he stated.
On the other side were representatives of the student loan industry, who urged the administration to abandon the proposal, which they said would be harmful to students, and instead work with them to reform the program. "I do believe the administration is approaching this from a sincere belief that they want to do the right thing and lenders, for the most part, don't disagree with what the administration is trying to accomplish," said Scott Fleming, director of the Chartwell Education Group, a lobbying firm that has represented lenders. "It's simply that we disagree with how they put it in practice."