Invest directly in higher education

Reform federal student loan practices away from subsidized privatization.

On Monday, University of Minnesota President Bob Bruininks joined Sen. Al Franken, D-Minn., on campus to discuss ending the 1965 Federal Family Education Loan (FFEL) program in favor of direct federal lending. A bill to this effect recently passed in the U.S. House of Representatives and is now before the Senate. Three-fourths of American colleges and universities currently use FFEL. Under the FFEL, the government pays private lenders subsidies to encourage them to lend to students. However, the government bears all the risk for these loans and the private lenders get to keep the profits âÄî an inefficient way to student lending process. Enter the Direct Loan program. Under the program, the Department of Education lends directly to students, rather than paying private lenders to be middlemen. The University currently participates in the Direct Loan program, but its students have a vested interest in the abolishment of FFEL. The billions of dollars that the U.S. government will save by lending directly could be reinvested in education, including the expansion of federal Pell Grants. President Barack Obama says this changeover will pay for 95 percent of pegging Pell grants to the rate of inflation and would allow for a broader definition of Pell qualification. Eliminating FFEL in favor of Direct Loans will transform the federal governmentâÄôs investment in private lending companies to an investment in students.