Radical Changes to the Student Loan Program to be Explored by Government Study Group

WASHINGTON, D.C., MARCH 2, 2000 - The most fundamental changes to the guaranteed student loan program since its original enactment in 1965 are being explored by the Congressionally-mandated Study Group on Market Mechanisms, which held its first meeting on March 1st. The study group includes numerous representatives from the student loan and higher education communities, and is headed by Barbara Bovbjerg of the General Accounting Office (GAO) and Maureen McLaughlin, Deputy Assistant Secretary for Postsecondary Education at the Department of Education (ED). Both GAO and ED will author the report, in consultation with approximately two-dozen governmental and non-governmental study group members.

    The first meeting of the Study Group included a preliminary discussion of several fundamental changes to the student loan program that will be examined in detail in the coming months. Changes under consideration include an auction of the right to make student loans, direct federal funding for guaranteed student loans and the issuance of student loans by the federal government with subsequent sale of financial interests in the form of student loan asset-backed securities. Additional proposals have been made by study group members including restructuring the program based on the Federal Housing Administration (FHA) model, and an exploration of a wider direct market competition involving extensive deregulation of loan terms and conditions by the Department of Education.

    Several members of the Study Group and other interested parties will be discussing models for student loan at the upcoming April 6 & 7th HEWI-USA Group Foundation conference on “Options for Student Loan Reform.” The conference is being held in Washington, DC and is specifically organized for the purpose of focusing on both student loan reforms and the plans for the government Market Based Mechanisms Study Group.

    Speakers at the conference include Ms. McLaughlin of ED, Nabeel Alsalam of the Congressional Budget Office, Ms. Bovbjerg of GAO, and several non-governmental representatives on the Study Group. “Those involved in the student loan program need to keep a close eye on the discussions of reform that are taking place now,” said John Dean, Chairman of HEWI. “The report of the Study Group could very well be used as a blueprint for a restructuring of the student loan programs in the next Congress.”

    Information on the conference and registration materials may be found at the HEWI web site at www.hewi.com or by calling 202.842-1302.

HEWI is a Washington, D.C. based information resource company serving the higher education community. The company publishes Student Lending. Information Technology in Postsecondary Education (ITPE), and Information Technology in Student Aid (ITSA). The company also holds seminars and conferences on topics of interest to the higher education community. For more information on our publications, our conferences and additional higher education resources, please visit our website at www.hewi.net.

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