Michaud Introduces Bill to Allow FAME to Help Maine Students (12-8-11)

WASHINGTON, DC -- Today, Congressman Mike Michaud introduced the "Student Loan Default Prevention Act," which is a bill that would allow the Finance Authority of Maine (FAME) to provide guidance to more than 20,000 Maine students annually on their federal loan portfolio. Due to federal student loan origination changes, state-based agencies like FAME have been precluded from working with students on new federal loans since July of 2010. According to The Project on Student Debt's report on the class of 2010, Maine ranks 2nd in the highest average amount of debt ($29,983) carried by each graduating student.

"For 20 years, FAME has serviced federal loans for Maine students," said Michaud. "While changes recently made to how federal student loans are handled are largely good, they didn't ensure that there was a way for students to receive comprehensive loan counseling services locally. My bill would allow state agencies like FAME to partner with the Department of Education to ensure that our students are getting the best services possible closer to home."

The Higher Education Act authorizes state-based and nonprofit guaranty agencies like FAME to provide comprehensive services in support of the Federal Family Education Loan Program (FFELP). Since 2010, no new loans have been originated under FFELP and all new loans have been made under the Federal Direct Loan Program (FDLP), which does not utilize the services of guaranty agencies.

"We greatly appreciate Congressman Michaud's efforts to amend the law to allow guaranty agencies like FAME to provide default prevention and aversion services for borrowers and potential borrowers of Federal Direct Loans," said FAME CEO Beth Bordowitz, who supports Michaud's bill. "Recent changes to federal loans have resulted in nationwide loan servicers, and many Maine students no longer benefit from a local source for help in managing their student loans. This legislation would benefit Maine students and families in this challenging economy by increasing awareness of loan terms and avoiding the potentially harmful consequences of delinquency and default with respect to these types of student loans."

Contractors hired by the Department of Education to administer the FDLP provide basic processing services on Direct Loans, but do not provide the comprehensive, locally-based services that are provided under FFELP to assist students and families plan, prepare and succeed in postsecondary education and to help borrowers with their repayment responsibilities. Schools have testified that they miss the services that were provided by FFELP entities to help them -- as well as their students -- manage their loan responsibilities through comprehensive training, financial literacy programs and assistance with debt management programs.

The bill Michaud introduced would authorize the Department of Education to enter into agreements with guaranty agencies specifically to support the FDLP through the provision of these supplemental services. FAME estimates that more than 20,000 Maine students could benefit from additional counseling services.

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[joan2897]

Thank you Mike for taking a good step towards transparency and information for our students and families in Maine, to avoid predatory abuses and become aware of the high default rates and consequences of debt from to heavily relying on student loans. Thanks Mike