Response to:“Dems: make student loans student friendly,” November, 14, 2006

While I appreciate your insight into the article “Dems: make student loans student friendly,” I can’t help but feel it was overly one-sided. You missed one very important note as you lambasted lenders – particularly on the 9.5% floor rate. The 9.5% floor rate was originally introduced to limit the amount lenders could profit when interest rates were extraordinarily high. While I will not defend the investigation that has occurred against Nelnet – since it is a for-profit lender which obtained those 9.5% loans through nonprofit acquisitions – I will defend the myriad of nonprofit lenders, many of them state agencies, which have historically used that 9.5% to either (1) act as lenders of last resort to borrowers who could not obtain loans from other lenders and (2) give “profits” back to students in the form of borrower benefits.

I am a recipient of a nonprofit lender FFELP loan – which gives me a zero percent interest rate after 3 years of on-time payments. Because I work in this industry – not for any lender I would like to add – I often find that in everyone’s frenzy to condemn lenders, the nonprofit lenders (who turn their “profits” into borrower benefits) get lumped in with their for-profit relatives. No differentiation is made between nonprofit and for-profit lenders and many students, colleges, and politicians are missing a large piece of the student lending puzzle.

How dare any politician penalize nonprofit lenders, and subsequently the hundreds of thousands of borrowers like me that have these borrower benefits, in the name of helping students? I will watch with great interest to see what kind of damage the students endure under the hands of Dems. Just like their Republican cousins, it seems that students always lose when political maneuvering, hyperbole, and rhetoric win over facts.

Justin Draeger
Graduate Student, Baker College

Submitted in response to:“Dems: make student loans student friendly,” November, 14, 2006