A Poor Case for Direct Student Loans

Considering the potentially serious problems facing families in obtaining student loans for the fall, the May 5 editorial "Lending to Students" was not The Post's finest hour.

The editorial not only failed to support efforts by Congress and the Bush administration to avert a crisis but was also written in a time warp: At the time, 66 lenders, not 48, as stated in the editorial, had stopped offering federal student loans (the total is now 75). A lender cited as evidence that there's no problem has revised its business strategy. The studies cited showing that direct loans are cheaper are dated; President Bush's fiscal 2009 budget confirms that guaranteed loans are more cost-effective.

The Post opposes Congress revisiting last fall's budget cuts -- even though the editorial said there is "some truth" to the view that these cuts made new loans unprofitable. A strong, private-sector-based federal student loan program, however, cannot long exist under these conditions. The "real problem" with businesses making government-backed student loans, the editorial said, is that there's never been a compelling reason for private lender involvement. But the case for a strong private-sector program is as compelling today as it was when President Lyndon Johnson created the program. Consumer choice and lender competition have produced innovation, better service, fewer defaults and lower-cost loans.

KEVIN BRUNS

Executive Director

America's Student Loan Providers

Washington