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"In a four-month inquiry, U.S. News canvassed more than 100 colleges and universities to determine which had abandoned the Education Department's direct-loan program--and at what cost to taxpayers. The review included interviews with lobbyists, federal lawmakers, private bankers, and officials at state lending agencies, Sallie Mae, and the Education Department.

Among the findings:

Some of the tactics banks and other private interests have used to win student loan business, critics say, are highly questionable. Lenders use proceeds from federal loans to entertain financial aid officers, providing them with free meals and drinks, golf outings, and sailboat cruises. Sallie Mae goes even further: It offers schools special pools of money that can be lent to students. In exchange, schools agree to promote other Sallie Mae loans on campus. In one case, an internal Sallie Mae E-mail shows, the company offered $4 million in special loans to a major university in exchange for its business. Sallie Mae says its program is legal, but Education Department officials say the offer merits further investigation."

AND "Twice each decade, lawmakers overhaul this system. They get the chance again soon. Debate begins early next year on loan provisions of the Higher Education Act. Opponents of direct loans want the Clinton-era program eliminated. At a recent education conference, Rep. Peter Hoekstra, a Michigan Republican, was blunt: "We should put a stake through its heart." However, Democratic Sen. Edward Kennedy of Massachusetts wants to strengthen the direct-loan program so that it can compete more aggressively against private banks. Sen. John Edwards, a North Carolina Democrat, would wipe out the FFEL program and switch all schools to direct loans. At current interest rates, he says, his plan would save up to $4 billion a year. "We have to use taxpayer money efficiently," Edwards told U.S. News. "That money shouldn't be used to provide subsidies to lenders but to get kids in college."

The whole article is at : http://www.usnews.com/usnews/issue/031027/education/27loans.htm