Michaud Introduces Bill to Allow FAME to Help Maine Students: Maine ranks 2nd highest in loan debt per student
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.
