5 Myths about Student Loan Reform Debunked

Campus Progress circulated this PDF today with counterpoints to the student loan companies (and a few US Senators) who are claiming that student loan reform measures are bad for a variety of reasons ...

For example:

Myth 2: Passage of student loan reform legislation will result in the loss of thousands of loan industry jobs.

“The student-loan provisions buried in the health care legislation intentionally eliminate private-sector jobs at a time when our country can least afford to lose them." -- Sallie Mae Spokeswoman Martha Holler, March 22, 2010


Fact: There will be no shortage of work for loan companies under the new reforms; all current loans under the old Federal Family Education Loan Program (FFELP) will still need to be serviced, as will all new loans made under the Direct Loan Program (DLP), and the same big lenders have already lined up for contracts to service new loans.

In fact, student loan giant Sallie Mae has announced it is in the process of bringing back 3,400 jobs from overseas. These jobs are returning to the U.S., at least in part, so that the company can be eligible for Department of Education contracts to service Direct Loans. In addition, most loan companies today do more than make federal student loans. Many offer consultation services to schools, private student loans, collections services, and other products and services, and will continue to be in business and employing people for these activities after reform is passed.

Companies like Sallie Mae seem to be playing politics with jobs, frequently changing their job loss estimates, and exaggerating the impact that the legislation will have on their workforce. Opponents of reform have claimed that 30,000 to 35,000 private sector jobs would be lost, but this is a very rough estimate of the total number of jobs that are involved in the FFELP program. No one seriously believes that job losses—even in the worst possible estimation—would approach this figure.

In addition, the bill’s investments in community colleges and minority serving institutions, made possible by ending the lender subsidies, will save and create jobs. And by expanding educational opportunity, the reforms will enable more young people to gain the skills and experience necessary to enter the workforce, thereby creating more jobs and strengthening the economy in the long term.


Excellent stuff.