ALEXANDRIA, Va.-Credit unions took issue with Obama administration claims that the end of FFELP will mean $68 billion in savings over the next decade.
"The bottom line is, the federal government cannot serve students as well as credit unions serve their members," said NAFCU President Fred Becker. "Every time the federal government tries to run a program or take back a program rather than letting the private sector do it, we learn hard lessons as a result. Whether or not their will be savings, that remains to be seen, but the result will be a huge, bureaucratic entity that provides terrible service."
University of Wisconsin CU Chief Credit Officer Mike Long agreed: "it will be interesting to see how the government handles the volume coming their way, and how the process works."
USC CU CEO Gary Perez offered a history lesson on college loans. "There is something very important missing from this dialogue-direct loans came into being during the Clinton administration. Terms offered to students were far superior as a direct result of capitalism. Financial institutions were in competition with each other. We eliminated up-front fees and made many other offers along the credit union pricing model. The direct loan option has been there, but banks and credit unions funded far more loans than direct loans because we were a better deal than the direct loan program."
In Austin Texas, SVP James Natstars at University FCU said it is "difficult to know the accuracy" of the figures being thrown around.
"So many times we hear about savings being brought about by legislation, but those don't always pan out. Part of the reason the FFEL Program came into existence is it is such a large and complex product, the government loan program was overwhelmed. So, credit unions and banks stepped up and became part of it."
Nastars acknowledged there were "some instances of mismanagement" involving financial aid directors at certain schools taking advantage of FFELP and receiving kickbacks from lenders. However, he insisted, "banks and credit unions were not part of that, and the problem was fixed."
