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Washington Partner Perspectives For December 27, 2007

Washington Partner Perspectives for December 27, 2007 Today’s questions are answered by John Dean, a principal of the firm and focus on what’s ahead for the student loan industry in 2008.

Dean served as an associate counsel to the Committee on Education and Labor in the 1980’s and has represented financial institutions and others involved in the Federal student aid programs since leaving Capitol Hill. Dean also serves as the chairman of Higher Education Washington, Inc. and is a practicing attorney.

The past year was a challenging one for the student loan industry. What do you expect in 2008?

Dean:
Simply put, a better year, but still one with challenges. First up will be completion of action on the reauthorization of the Higher Education Act. While that bill does not include more budget cuts, other provisions in the bill could still use some fine tuning. Second up will be the President’s FY 2009 budget. We don’t expect another set of major budget cut proposals, but its hard to predict what the Bush White House might be thinking. They certainly took the industry by surprise last year. Third up will be negotiated rulemaking, which is certain to offer its own set of challenges. And finally we have the 2008 elections. Because several major Presidential candidates have called for the end of FFELP, the industry will need to respond to that.

You didn’t mention the student loan scandal. Is that over?

Dean:
No, it isn’t. I should have mentioned it. I expect the “scandal” to continue and perhaps get more intense around election day, if you know what I mean?

Earlier this year, an analysis was published based on Department of Education data suggesting that with the 2007 budget cuts, FFEL loans may now be cheaper than Direct Loans. Do you expect this?

Dean:
I expect that FFEL loans will continue to be cheaper than Direct Loans but I can’t tell you what the official budget numbers might look like because the budget scoring methodology continues to be prejudiced in favor of Direct Loans. It would appear, however, highly likely that the gap between FFEL and Direct Loans will at least narrow, which should be a good thing for those who would like to see the private sector continue to be involved in student lending.

Do you expect student loans to be a major campaign issue in the Presidential races?

Dean:
No, I don’t, which is not to say that some candidates won’t try to make it an issue. The fact is that Congress addressed or is in the process of addressing what most people saw as two of the largest problems in student loans: the cost and the marketing problems. Whether you agree with the depth of last year’s cuts or not, there is no question the cuts were very large. That would appear to satisfy any concern that the program costs too much. Congress is also now enacting new marketing reforms, many of which are similar to the new final student loan regulations the Department published and the various “Codes of Conduct” promulgated as a result of the New York investigation. The only real problem with student loans that remains is the debt burden issue. Although some people don’t want to admit it, that problem cannot be fixed by “reforming” student loans, but only by addressing the cost of college. And, as is well established, it is all but impossible to find a politician willing to really take that issue on.

Do you expect more student loan legislation this year?

Dean:
As you know, the Higher Education Act reauthorization bill isn’t done yet. So that will definitely happen. After that will be the inevitable technical corrections bill. One student loan bill we should all hope we don’t see is one addressing a liquidity crunch in student loans caused by current market conditions.

You think that could happen?

Dean:
I’m most definitely not an expert, but it is clear that a lot of people are very skittish. If pockets of loan access problems on private loans surfaced, I would not be surprised. If this happens, I hope that Congress does something because individual students’ educational plans will be disrupted. I don’t, however, know exactly what the appropriate action would be.

From your answers you appear to have mixed expectations for 2008. Am I right?

Dean:
Yes. This year most definitely will be better than 2007 but will be no cakewalk.


Washington Partners, LLC is a full service government affairs and public relations consulting firm that has built a reputation for producing results. The partners - long-term insiders in education policy - came together in 2002 to form Washington Partners, LLC. The firm boasts a staff of strategic and innovative thinkers providing a wide array of services that are customized to meet clients' needs. By consistently exceeding client goals and expectations, the firm's client list continues to grow. The firm's website may be found at: www.wpllc.net.

"Partner Perspectives" is produced weekly by Higher Education Washington, Inc. and is available on both the Washington Partners, LLC website and under "Opinions and Interviews" in the HEWI Quad located at www.hewiquad.net. Opinions expressed in "Partner Perspectives" are those of the person interviewed and not those of Washington Partners, LLC, its clients, or of Higher Education Washington or the HEWI Quad.

"Partner Perspectives" may be reprinted upon request made to Higher Education Washington, Inc. or Washington Partners, LLC.