The Corporations Are Running Scared

Posted by ADAM

I just got this e-mail from Citibank, which is the lender on my student loans.

Dear ADAM [last name deleted],

Thank you for the opportunity to help you obtain the education of your choice. As a student loan provider for the past 50 years, Citi has provided financial aid assistance to millions of students and parents nationwide.

Given the challenging economy and continued increases in the cost of higher education, it is critical that the U.S. student lending system serves the best interests of students and their families. If you believe that competition and choice among student loan providers is valuable, you have an opportunity to make your voice heard.

Why Get Involved?
The government budget outline proposes offering federal student loans solely through the federal government’s Direct Lending Program starting July of next year. While this proposal will not impact a borrower’s ability to obtain a federal student loan, it will eliminate your ability to choose a student loan provider. It will also substantially increase the national debt since each and every federally-insured student loan will be funded by the Federal Treasury through the issuance of treasury securities. This proposal impacts you as a citizen – both as a taxpayer and as a borrower.

Why Does Competition And Choice Matter?
Without private lender involvement through the Federal Family Education Loan Program, students and their families will not enjoy the benefits that competition has made possible for more than 40 years. This competition has provided not only a choice of lenders, but also innovative products and services, such as:
– a variety of borrower benefits that lower your cost of borrowing
– financial literacy programs that educate you on how to borrow responsibly
– web-based tools and resources to advise you about your financing options
– default prevention services to help you pay back your loans

Competition also has driven increased customer satisfaction as a result of the responsiveness, personal attention and on-campus support that student loan lenders have provided to borrowers and schools nationwide.

Make Your Voice Heard
If you value the ability to shop for, evaluate and choose your student loan provider, make your voice heard by contacting your Members of Congress and by signing one of the online petitions that support borrower choice and competition in federal student lending.

Sincerely,
The Student Loan Corporation

I replied:

Dear Student Loan Corporation,

Respectfully, I believe direct government lending is a wonderful idea and will benefit college students greatly. If I were going to college now and not ten years ago, I would certain avail myself of that program. You wrote about the importance of competition. Competition from the government shouldn’t concern you unless your company works inefficiently, something that would indicate poor corporate structure. If you believe your company is flawed in this way, you should try to make it more efficent to better serve the needs of your clients and maximize your profit. That is the solution to competition from government loan providers, not a carefully worded e-mail designed to mobilize your clients on your behalf by giving them misleading information. Preying on their ignorance in this way is unlikely to work — they are all college graduates, after all.

Sincerely,
Adam [last name deleted]

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Published in: on May 13, 2009 at 2:26 PM  Leave a Comment  
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