May 12, 2009

Congress Passes Budget Resolution; President Releases Detailed Budget Request

"Sense of Congress" Outlines Continued Role for Private Entities in Student Loans

On April 30, both the House and Senate passed a 2010 budget resolution that included reconciliation instructions for the Education Committee to create $1 billion in savings.  This action does not guarantee that the President's proposal for transition to direct lending will be adopted. The House and Senate will ultimately have to reach consensus on potential changes that will be made to student aid programs and have until Oct. 15 to write legislation that meets the targeted savings amount. Proposals from the student loan community are expected to continue to be submitted as alternatives to the President's plan.   

An important piece of the budget resolution is a "Sense of Congress," which outlines Congressional intent to preserve a role for the private sector in the student loan programs. 

It is the Sense of Congress that:

(1) Nothing in the resolution should be construed to reduce any assistance that makes college more affordable and accessible for students including but not limited to student aid programs and services provided by nonprofit State agencies and private lenders;

(2) Private and non-profit lenders, originators, and loan servicers help students plan for, apply to, and pay for post-secondary education and training;

(3) Any reform of the federal student loan programs to ensure that students have reliable and efficient access to federal loans should include some future role for the currently involved private and non-profit entities, including state non-profits with 100% FFELP lending in the State, and capitalize on the current infrastructure provided by private and non-profit entities in order both to provide employment to many Americans during this time of economic distress and to maintain valuable services that make post-secondary education more accessible and attainable for many Americans; and

(4) Therefore, pursuant to any changes to the student loan programs, loan processing, administration and servicing should continue to be performed, as needed, by for-profit and non-profit entities.

This strong message illustrates recognition of the valuable services FFELP providers deliver to students and families each day. OGSLP especially appreciates the continued strong support and voice of the Oklahoma financial aid community throughout these deliberations.

As a follow-up to the President's Feb. 25 budget blueprint, the White House released a more detailed $3.4 trillion FY2010 budget request for discretionary programs on May 7. As expected, the request includes a proposal for transition to direct lending beginning in academic year 2010-2011. Details about cost assumptions for both loan programs are included and are sure to become part of the conversation as the Education Budget Committee begins deliberations, which are expected to include discussion about alternative loan proposals. We'll update you as dialogue continues.