By Paul Basken

Washington

Bank-industry leaders may still be fighting for the future of the bank-based system of federally subsidized student loans, but the troops may be deserting them.

The Consumer Bankers Association opened its 2009 Student Lending Conference here on Thursday with the announcement that this would be the last such session. Attendance was about 130, or about half the level seen in recent years, and association officials said anyone wanting to discuss student lending in the future would have to do it at the banking association's main annual conference.

The gatherings have turned increasingly somber in recent years, as sentiment has grown in Congress for ending the bank-based system of student lending and channeling all federally subsidized student loans through the Education Department's direct-lending system.

The banking industry has long argued that its method of loan delivery was cheaper for taxpayers. But a bill pending in Congress to end the bank-based system carries an estimate of creating $87-billion in government savings over 10 years from the switch to direct lending. The legislation proposes to channel most of those savings back to students in the form of grants and lower interest rates.

The nation's largest student-loan company is nevertheless still fighting hard to keep the bank-based system. In a conference call this week with college-loan administrators, John F. Remondi, vice chairman and chief financial officer at Sallie Mae, urged the campus loan officers to call lawmakers and make known their opposition to a system that relies solely on direct lending.

Mr. Remondi said that if a vote on the bill is delayed at least until the end of January, the government would be required to make a new estimate of the savings from switching to direct lending. If that happened, Mr. Remondi said, advocates could see a loss of billions of dollars that had been proposed for student aid under the bill, because by then hundreds more colleges probably would have already switched voluntarily into the direct-lending system.

A lot of colleges also see the end of January as the "drop-dead date" for when they need to move into direct lending in time to have new systems running for the next student-loan cycle if Congress hasn't taken any action by then, Jeffrey R. Noordhoek, president of Nelnet, told the banking conference on Thursday.

The conference reflected some tension within the industry about how to cope with the group's declining fortunes in the student marketplace. Daniel M. Meyers, president and chief executive of the First Marblehead Corporation, which helps supply private student loans, complained that Sallie Mae had recently accused other lenders of "sitting on their thumbs" while their private-loan volume dwindled.

Mr. Meyers called the suggestion "ridiculous" and "self-serving," though he also said that the market among middle-class students for private loans, which are loans issued without any federal subsidy, is effectively "dead" for now, given that banks will issue private loans only to well-qualified borrowers.