Robert Novak objects to the Department of Education's direct student loan program [op-ed, Oct. 18] but fails to understand federal loan support for college students.
In 1993 the administration created the direct student loan program to give college-bound students the option of borrowing directly from the Education Department and saving taxpayers money that they would otherwise pay to lenders.
Last year about two-thirds of students' loans came through banks; the rest came directly from the Education Department.
Following a 1998 change in the law, some lending institutions began offering substantial discounts to attract more business. What appears to have Mr. Novak -- and many Republicans on Capitol Hill -- so exercised is that the direct student program also lowered its fees to ensure that the loan "terms, conditions and benefits" to students are the same in both programs, as the law requires. Despite Mr. Novak's claim, the department's decision to reduce direct loan fees is consistent with the law.
Mr. Novak supports the Republican proposal to penalize students in the direct loan program by raising their fees. He wrongly suggests that the government's direct program costs the Treasury more than guaranteed loans. But his figures don't include the high profits banks earn on student loans, paid for by students and taxpayers. In fact, taxpayers have saved $4 billion so far under direct lending.
Student loans are perhaps one of the best examples of a business-government partnership. But as the law has always intended, our mutual responsibility is to help students maintain a cost-effective program.
MARSHALL S. SMITH
U.S. Department of Education