MATTHEW HANSEN / Lincoln Journal Star | Posted: Friday, October 29, 2004 7:00 pm
Two University of Nebraska regents sharply criticized the indirect student loan system to the state's U.S. senators and congressmen calling that system perverse and poorly designed one day before the board greenlighted a deal between the University of Nebraska-Lincoln and Nelnet Inc., an indirect student loan provider.
Regents Chuck Hassebrook of Lyons and Howard Hawks of Omaha sent letters to U.S. Sens. Chuck Hagel and Ben Nelson, and U.S. Reps. Lee Terry and Tom Osborne Thursday, urging them to support legislation that would improve the Federal Direct Loan Program.
In the letter, they say the direct loan system, which allows college students to borrow money directly from the federal treasury, is cost-effective and therefore benefits taxpayers.
Indirect student loan providers such as Nelnet offer government-subsidized loans to students, a practice Hassebrook and Hawks believe "essentially takes money out of taxpayers' pockets and delivers it to student loan companies that take little or no risk."
The pair quote from a recent Center for American Progress study that says taxpayers saved $5.5 million on UNL student loans during the 2001-02 school year because the school used direct lending instead of contracting with a company such as Nelnet.
On Friday, the regents approved Nelnet as the main loan provider for the school's 1,300 graduate and professional students, primarily because the agreement will net UNL as much as $600,000 a year it can use to aid low- and middle-income students.
"It's putting us into an impossible position," Hassebrook said Saturday. "What's good for students or what's good for taxpayers?"
Hassebrook says he sided with the students by voting for the Nelnet deal. He was joined by five other regents.
Hawks and Regent Randy Ferlic of Omaha were the lone dissenters.
The board voted after UNL Chancellor Harvey Perlman defended the Lincoln-based student loan provider against criticism that it had wrongly used a loophole to profit off the federal government.
It ended the practice in May, Nelnet's president, Don Bouc, has said.
Perlman also said it was unclear whether direct or indirect student lending was better for the country's taxpayers, a sentiment seconded by Bouc after the meeting Friday.
Three-fourths of the nation's college loans are from indirect loan providers, a system that's improved immensely since it was introduced, UNL's chancellor said during the meeting.
Hawks and Hassebrook don't share that sentiment. They repeatedly portrayed the university leadership and the NU Board of Regents as caught between wanting to help students and doing what's right as taxpayers.
"Our students might receive as much as $600,000 a year. But the added cost to taxpayers would be greater, twice or more our students' benefit," the letter says.
"A system with these kinds of perverse incentives just doesn't make sense."
Reach Matthew Hansen at 473-7245 or mhansen@journalstar.com.