Credit unions and banks lost a key round in the fight over control of student loans last week when a House committee voted for an Obama administration plan to replace the Federal Family Education Loan Program with direct student lending.

Approximately 1,000 credit unions offer these loans, but the Obama administration contends that replacing them with direct lending will save $87 billion over 10 years.

The House Education and Labor Committee approved the bill 30-17, mostly along party lines. The full House could take up the measure as early as this week.

CUNA and NAFCU argued that eliminating the program would make it harder for credit union members to navigate the student loan system and would negatively impact the relationship between credit unions and their members.

“Credit unions that specialize in student lending provide a high-quality service for their student members and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students,” CUNA President Dan Mica wrote the committee.

“We have concerns that the legislation's move to an all direct lending program could create new challenges for credit union members to get the aid that they need to attend schools in the United States,” NAFCU President Fred Becker wrote the panel.
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