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Letter to Senator Tom Harkin

Letter

By:
Date:
Location: Washington, DC

Lincoln, Pryor Outline Arkansas Priorities As Student Loan Reform Legislation Takes Shape

U.S. Senators Blanche Lincoln and Mark Pryor today outlined their Arkansas priorities for student loan reform legislation in a letter to Senator Tom Harkin (D-Iowa), chairman of the Senate Committee on Health, Education, Labor and Pensions (HELP). The committee is currently evaluating proposals in order to write a student loan reform bill.

Senators Lincoln and Pryor emphasized that proposed reforms should lead to savings that could be invested in students and used to expand access to higher education; however, these reforms should be undertaken in a way that does not disrupt services currently being provided to students or hinder their access to loans for the upcoming academic year. In addition, the changes should not significantly alter the meaningful role that non-profit state and local agencies have played in lending and servicing student loans in Arkansas.

"As we consider transitioning from one student loan program to another, we have to consider that the financial aid application process for the 2010-2011 school year has already begun, and many schools in Arkansas have already prepared consumer information materials about financial aid programs and processes," Lincoln said. "While there are steps we can and should take to capture savings in the way we originate and service student loans, we must also ensure that our schools are provided with the adequate resources and time to make any necessary adjustments."

"I commend Senator Harkin for his work on this important issue, and look forward to working with him as we move forward."

"There is no doubt student loan programs could be more effective and efficient for students and taxpayers," Pryor said. "As the Senate works toward this reform, we must fix what's broken and leave in place what works. At the same time, we need to be careful not to jeopardize our students' short-term access to loans or services, especially at a time when more and more students are juggling financial hardship and rising college tuition."

The Senators also indicated that reform legislation should preserve the role of state-based, non-profit agencies that currently provide customer service to students and higher education institutions. It is important that these agencies be allowed to continue their long-standing relationships with Arkansas schools and communities, ensuring that existing loan servicing infrastructure in Arkansas is put to good use and that jobs are able to stay put.

"For many years, the Arkansas Student Loan Authority (ASLA) and the Student Loan Guarantee Foundation (SLGFA) have worked intimately with students and families in Arkansas to provide critical education financing and support services," the letter states. "These services include financial literacy education, outreach services, loan counseling, delinquency and default aversion assistance, and compliance and student loan training for schools."

In 2008-09, for example, the Student Loan Guarantee Foundation of Arkansas facilitated financial aid training workshops for 215 high school guidance counselors, served 3,150 students and parents through financial aid literacy programs, trained 82 financial aid administrators and mailed 58,000 pieces of financial aid literature. The organization had 59,100 hits to its Web site and handled 14,000 phone calls and 4,000 e-mails from parents, students, schools and lenders.

Since its start in 1966, SLGFA has guaranteed $6.7 billion in student loans to more than 640,000 borrowers. In fiscal year 2009, their loan volume was $567 million for 136,000 borrowers.

"The Student Loan Guarantee Foundation of Arkansas (SLGFA) is pleased that Senators Lincoln and Pryor see the value of the student and school services that we provide," said Ronnie Nichoalds, SLGFA Executive Director. "We have enjoyed working with Senators Lincoln and Pryor and their staffs on these issues that are important to Arkansas students and schools."

The Arkansas Student Loan Authority (ASLA) has funded $1.4 billion in loans since the inception of the agency. Currently, 42,000 students have loans that are held and serviced by ASLA. In addition, the agency participated in more than 100 financial aid workshops and high school college fairs in 2009, and printed 30,000 "How to Pay for College" books on federal and state aid programs to be distributed to students. ASLA awards 25 $1,000 scholarships annually in an essay contest, and provides several college planning and funding resources on their Web site. They also administer a free scholarship search.

"Senator Lincoln and Senator Pryor are taking action to ensure that reliable access to financial aid for higher education remains available for Arkansas students," said Tony Williams, Executive Director of the Arkansas Student Loan Authority. "We greatly appreciate their willingness to listen to the Arkansas higher education community and take a lead in Congress to address funding concerns for Arkansas students."

Student loan reform legislation has been passed by the House of Representatives and is awaiting action by the Senate HELP committee before it will be considered by the full Senate.

The text of the letter is below:

Dear Chairman Harkin:

As the Senate Committee on Health, Education, Labor and Pensions begins to consider student loan reform, we look forward to working with you to develop legislation that generates a significant amount of savings that we can reinvest in students and utilize to expand access to higher education for more Americans. In achieving this reform, we are hopeful it can be done in a way that both avoids disruption in loan delivery next year and maintains a meaningful role for non-profit state and local agencies that have been such a productive partner in the lending and servicing of student loans.

First and foremost, we would like to relay our concerns regarding the timing of implementation of a potential transition from the Federal Family Education Loan (FFEL) program to the Federal Direct Loan (DL) program by July 1, 2010. Over 90 percent of student loans made in Arkansas in the current academic year were made through FFEL, and it is imperative that we provide higher education institutions a sufficient amount of time to implement the changes required to administer DL. The application process for the 2010-2011 school year has already begun and many schools in Arkansas have already prepared consumer information materials about financial aid programs and processes. Making a smooth transition to DL without any disruption in services by July, particularly at a time when many schools are struggling with short staffing and overwhelming workloads, becomes increasingly unrealistic with each passing day.

We were encouraged that the House-passed Student Aid and Fiscal Responsibility Act included a provision to allow state-based, non-profit student loan lenders to contract with the U.S. Department of Education to provide loan servicing. This provision is important because it allows for the continuation of local, state-based customer service to students and higher education institutions. It also justifies the continuation of jobs in our home state and makes use of existing loan servicing infrastructures.

For many years, the Arkansas Student Loan Authority (ASLA) and the Student Loan Guarantee Foundation of Arkansas (SLGFA) have worked intimately with students and families in Arkansas to provide critical education financing information and support services. These services include financial literacy education, outreach services, loan counseling, delinquency and default aversion assistance, and compliance and student loan training for schools. The elimination of FFEL would likely lead to a less meaningful role for both the ASLA and the SLGFA in the servicing of student loans. As a result, many of these valuable student services would be disrupted and the relationships they have long-cultivated with Arkansas schools and communities could be endangered. That is why we are hopeful that any student loan reform legislation that emerges from the HELP Committee will include a guaranteed and dedicated funding stream that ensures non-profit entities such as the ASLA and SLGFA can play a meaningful role moving forward. To ensure a quality of service that is in the best interest of students, we would expect any such future funding to be contingent on quality measures that demonstrate the services performed were to the satisfaction of those receiving the services.

Thank you for your continued leadership on this and a host of other issues. We are grateful for your time and consideration, and look forward to working with you as the Committee seeks to enhance the promise of higher education for more Americans.


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