NASFAA Proposes New Student Loan Program Model

Washington, D.C. (March 19, 2009) The National Association of Student Financial Aid Administrators has just forwarded to its members, the Obama administration, and selected members of Congress a new approach to student loans that would replace the Federal Family Education Loan Program, the Direct Loan Program, and the Federal Perkins Loan Program with a program that integrates the best aspects of all three.

Drawing on the expertise of thousands of student aid professionals through its National Conversation Initiative on College Access (NCI), NASFAA developed a conceptual framework for a new student loan model combining the most desirable features of today’s existing loan programs.

This new, integrated loan program would be simpler and more equitable for students while expanding the amount of capital available to make loans through the capital markets. The proposed loan model encourages all beneficiaries of postsecondary education (i.e., borrowers, state governments, private employers, friends and families, and all Americans) to help pay down borrowers’ debt levels and raise capital for a self-sustaining loan fund.
NASFAA’s proposed student loan model:

• Provides consistent and equal terms, conditions, and benefits to all borrowers
• Offers a seamless loan origination, disbursement and repayment experience for students
• Ensures a predictable and continuous source of capital for student loan funding that isn’t dependent on any single entity
• Allows individuals, families, companies, financial institutions, and all Americans to express their support for higher education by using government-backed special purpose bonds
• Reduces federal expenditures by creating a self-sustaining funding source that relies on new, safe investment vehicles
• Leverages technological and business innovations in the private sector by creating a common servicing platform that relies on a centralized database of all borrowers and can be used by multiple servicing agents
• Creates new incentives for businesses, individuals, and states to help students repay student loan debt
• Capitalizes on the expertise and best practices developed by all entities currently participating in the existing loan programs
• Is not the FFEL, Direct Loan, or Perkins Loan program, but rather an entirely new loan program created from the most positive aspects of all three

"We now have a unique opportunity to dramatically redesign the program to better serve students," said NASFAA President and CEO Dr. Philip Day. "Our new model offers the groundwork for productive discussions that I expect will ultimately result in a simple, efficient, reliable, and transparent system of providing education loans to families."

This preliminary student loan model is just one piece of a larger set of NCI student aid policy recommendations that NASFAA will make public shortly. The recent release of President Obama’s FY 2010 budget has convinced us to release our student loan model in advance to ensure that it is considered as part of the continuing conversation and dialogue on changes to the student loan program.

NCI represents the collective recommendations of thousands of financial aid professionals, input from renowned public policy experts, and careful analysis of more than 40 prominent research studies. The overall goal of the NCI campaign is to create policy recommendations that increase college access, reduce the financial burden placed on students and families, and increase the numbers of students who ultimately graduate with a college degree–especially those who have been historically underrepresented and underserved. To learn more about NCI, go to nasfaa.org/redesign/nci/ncicenter.html.

Members of the media and others are welcome to contact NASFAA Vice President of Planning and Development Justin Draeger for more information about NASFAA’s student loan model at (202) 785-6960 or DraegerJ@NASFAA.org.

About NASFAA
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 20,000 financial aid professionals at nearly 3,000 colleges, universities, and career schools across the country. Each year, financial aid professionals help more than 16 million students receive funding for postsecondary education. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. In addition to its member Web site at www.NASFAA.org, the Association offers a Web site with financial aid information for parents and students at www.StudentAid.org.

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