Edfinancial Services advocates coalition reform proposal

7/8/2009

Knoxville, Tenn. - Edfinancial Services joined a diverse coalition of lenders, guaranty agencies, secondary markets and servicers representing all sectors of the student loan community - nonprofit, for-profit and state-based - to announce a reform proposal that builds on President Obama's student loan plan. The Student Loan Community Proposal offers the same level of taxpayer savings for student financial aid, while preserving consumer choice, borrower default-prevention programs and jobs here in Tennessee.

"We've worked together as an industry to craft a comprehensive plan for student loan reform that benefits all stakeholders: students, families, schools and taxpayers," said Tony Hollin, chairman and CEO of Edfinancial Services. "This proposal incorporates choice and competition, preserves jobs and offers comparable savings to the Administration's 100% Direct Lending plan."

The Student Loan Community Proposal endorses the core principles of the Administration's reform effort - using federal funds to guarantee the stability of student loan financing, eliminating subsidies to private lenders and generating historic savings for student financial aid - while maintaining superior service for students and schools and preserving jobs nationwide.

Furthermore, the proposal meets these goals without the significant transition risk assumed by 4,500 schools that comes from the Administration's planned government takeover of more than $60 billion in private-sector-originated student loans. It guarantees taxpayer savings will be available to deliver on the Administration's proposal to expand the Pell Grant program by establishing a fee-for-service system for loan originations, servicing and collections to be performed by student loan service providers of a student's or school's choice.

"A key component of this consensus plan is the prevention of split-servicing, which requires students to make multiple student loan payments to multiple servicers," said Hollin. "In an already difficult economy, new graduates are struggling to meet their financial obligations - we need to simplify not complicate the process for them."

This Student Loan Community Proposal also achieves the following:

• Allows schools to maintain the ability to choose nonprofit and state-based agencies to provide originations or servicing in their states;
• Permits current originators, like Edamerica, to continue to provide origination services if schools or students choose them, eliminating the massive transition risk that comes from requiring thousands of schools to immediately change programs;
• Expands default prevention assistance, counseling, financial literacy and advocacy programs from guaranty agencies to all students and families; and,
• Preserves the 35,000 jobs that comprise the existing student lending infrastructure.

"This is a remarkable achievement, since so many different organizations, many of which are competitors, have reached consensus," added Hollin.

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Edfinancial Services is a private corporation headquartered in Knoxville, Tenn., with satellite servicing centers in Little Rock, Ark., and Jacksonville, Fla. Servicing student loans nationwide, Edfinancial Services administers student loan volume in excess of $9 billion. Edamerica is a top-ten student loan provider and has helped over a million students and families realize their dreams of higher education by offering low-cost postsecondary student loans nationwide. Edamerica is an Edfinancial Services lender.