College Guide

Blog

March 04, 2010 7:29 PM Direct Lending, Not so Difficult

By Daniel Luzer

FA.jpg

Secretary of Education Arne Duncan went before the House education committee yesterday morning to defend the administration’s plan to move to direct lending. Under the Student Aid and Fiscal Responsibility Act now stuck in the Senate, all federal student loans would be distributed by colleges, eliminating the student lending industry that currently services and manages student loans.

Some Republicans are skeptical. According to an article by Libby Nelson in the Chronicle of Higher Education:

Duncan dismissed concerns raised by Republican members that the switch to direct lending would be too difficult for colleges to accomplish quickly.
Republicans, though, repeatedly questioned the wisdom of switching to direct lending this summer, citing fears that students would be unable to get their loans in time for fall classes.
Thousands of colleges have switched to direct lending on their own in the past few years, Mr. Duncan told the committee in response to several questions. For most institutions, the transition has taken place in a matter of weeks, he said.

Seriously, weeks. Of course, if colleges truly thought they would have a problem effectively processing student loans in the fall they could have, say, taken steps to move to direct lending. This was what the education department recommended back in October, which colleges mostly seemed to ignore.

If the Senate passes the bill, all American colleges would be required lend directly to students by July 1.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer