WASHINGTON - When Leo Kornfeld came to the Department of Education under President Jimmy Carter, his job was to save the private sector's student lending system.

Since Bill Clinton asked him to come back to the department in 1992, his job has been to end that system.

As head of the department's financial assistance programs, Mr. Kornfeld has been responsible for implementing the Clinton administration's direct loan program, which could cut the 7,000 banks involved in student lending out of the market.

The former Citicorp vice president has been much more than a bureaucrat carrying out the President's agenda. Indeed, bankers are taking a vital interest in Mr. Kornfeld because he affects the fate of billions of dollars in student loans.

"Leo has served the function at the White House of saying, 'This is a real program, and this is going to work,'" said John Dean, a lawyer with the Consumer Bankers Association. "Without Leo, Clinton would be less enthusiastic about direct loans.

"This guy has had major impact on policy."

Even his critics concede that Mr. Kornfeld has a tenacious, can-do quality. They believe he is motivated not by politics, but by a sense of doing the right thing.

"He is willing to ignore most bureaucratic rules and just do it," says one banking official who has followed Mr. Kornfeld's career from his days in the Carter White House. "He is very convinced that the old program is not worth saving and direct loans is the way to go."

Mr. Kornfeld spent 12 years as a naval officer and then designed computer systems for a New York consulting firm. Citicorp acquired the firm in 1970, and Mr. Kornfeld spent five years as vice president of the bank's computer consulting division.

After serving in the Carter administration from 1978 to 1980, Mr. Kornfeld became president of a computer software firm in New York. In 1989 he went to work at Pace University, where he spent three years as vice president of enrollment.

"I'm very conscious of the desire to make a profit, but I'm just as upset with rip-offs," Mr. Kornfeld said. "You cannot run a program with 7,000 lenders, 41 guarantee agencies, and 90 secondary markets all doing it their way and all getting paid by the federal government."

Mr. Kornfeld favors the direct loan system because it has "one guarantee, one lender, and one holder."

"It allows students to get their money efficiently without being harassed by a complicated system," he says.

But Mr. Kornfeld's aggressive management of the direct loan program - officially the Federal Family Education Loan Program - may trigger its downfall. The plan to take direct lending from 5% last year to 100% in 1998 has fostered considerable opposition from private lenders and lawmakers in Congress.

Mr. Dean said Mr. Kornfeld has "demonized" banks during the debate by making them appear to have no interest in students.

"Banks are presented in a way that they are only after profits," Mr. Dean said. "They need to be more cautious in presenting the issues."

Even direct-loan supporters such as the American Council of Education question Mr. Kornfeld's aggressiveness.

David Merkowitz, a spokesman for the council, said he supports capping direct lending at 60% of the student loan market.

"If you tried to go faster than that, you might not be able to work out all the bugs that may develop," he said.

Mr. Merkowitz added, however, that the success of the program so far is due to Mr. Kornfeld's top-notch management.

"I think he enjoys a very good reputation ... a lot of schools are willing to go into the program because of their confidence in him," Mr. Merkowitz added.

Some of this confidence is due to Mr. Kornfeld's performance under President Carter.

In 1978 Mr. Kornfeld was brought in to computerize the guaranteed loan program, whose records were then being kept on index cards.

"Default rates were rampant, and there were shoe boxes full of loans sitting around the office," Mr. Kornfeld said in an interview.

Because of computerization, the department was able to compare its records with the Internal Revenue Service to determine whether defaulters were making enough to pay off their loans. Despite these improvements, the program was still plagued with high default rates into the 1980s.

Mr. Kornfeld says today that he would have advocated direct lending if he'd thought of it.

Mr. Lumetta writes for Medill News Service.

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