I want to remind you of why the Democrats are voting to remove the "private" option for student lending. You wrote in your news letter:
In 2006, FFELP was overwhelmingly popular with schools and students, accounting for more than 80 percent of the student loan volume. Sound familiar? This mimics much of the satisfaction with the current health care delivery system. But yesterday, the Democrat-controlled House of Representatives voted to eliminate FFELP provided by private lenders, which have enabled over 200 million loans to college students totaling nearly $800 billion. The result: a government-takeover of the student loan industry.
One would only have to do a rudimentary search on the issue of student loans in the past 5 years to find out how corrupt the "private" portion of the lending had become with major kickbacks to University personnel for favoring one lending institution over another, negotiated high fees for originating loans, "loan steering" by University personnel of students to "preferred high fee loans", all the way to the reckless "investments" into consumer debt backed securities by Sallie Mae which nearly bankrupt the company. There was so much corruption from the financial institutions taking advantage of the "private / public" partnership in student lending there was left only 2 options:
1) terminate all government backed student lending (which in the current credit environment would be a catastrophe)
2) remove the corrupt, kickback laden, reckless securitization and expansion into direct risky consumer lending (due to the ability to make mounds of money securitizing these risky loans in the credit boom up to 2006) of the "private" lenders.
At this time number 2 has won out.
Instead of bashing the current decision, I would like to see you come up with a new bill allowing "private" lending in this area again [and soon] that would put in place a host of "protections" that would make sure the kind of shady lending practices that were happening would not happen again and would make sure the "student lending" programs backed by the government STAYED "student lending" and not become reckless unsecured lending just to send pooled loans to Wall Street where millions could be made selling and creating derivatives off of these products.
Sincerely,
Patrick Henry
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