The Bank of North Dakota has been involved in the federal student loan program as long as it has been a program. According to the bank's Web site, it issued the first such loan in the country in 1967.

Pending federal legislation could mean that it someday makes its last.

The state-owned bank issues between $120 million and $140 million in loans a year or more than three-quarters of the student loans made in North Dakota. It has played such a large role in college financing that, for multiple generations of college educated North Dakotans, mailing an envelope to the bank is a monthly ritual.

"Most students' parents and even grandparents have gone through the Bank of North Dakota," said Jeff Jacobs, director of financial aid for Bismarck State College. His office handled $12.4 million in loans last year, and close to 90 percent came through BND.

The U.S. House of Representatives approved a bill this month to change the way federally guaranteed education loans are made, cutting out banks' roles as middleman and issuing the loans directly. The bill now goes to the Senate, where it could be modified or voted down.

The bill would significantly change a major part of the bank's business, but until it emerges from the Senate any decisions regarding staff or bank operations would be premature, said bank President Eric Hardmeyer.

"We're continuing with business as usual," he said. "We're not prepared to give up the fight."

Under the existing federal student loan program, the government provides guaranteed loan repayments and other incentives for private banks - and in the case of the Bank of North Dakota, a state-owned entity - to issue loans to students. The public-private arrangement made sense 40 years ago when the government needed local banks to handle lending across the country, said Jason Delisle of the New America Foundation, a nonprofit policy institute. Changes in technology and regulations have since it possible for the government to lend directly.

"Localities mattered in the '60s and '70s. They don't anymore," Delisle said.

Hardmeyer said that banks can provide better service to students than the government, which offers one "plain-vanilla" product locked in at a 6.8 percent interest rate.

"The Bank of North Dakota is in a better position to service students rather than a huge federal bureaucracy," he said.

Delisle said the argument that private sector is more innovative and efficient is undercut by the fact that lenders are required to offer identical rates and terms. The main advantage that banks get through issuing loans is hooking customers for other financial products, he said.

Regardless of how the legislation turns out, the bank still has $800 million in existing loans on its books that will continue providing revenue. The bank also provides nonfederal loans through its Dakota Education Alternative Loan program.

Depending on the final version of the bill, the bank could have a role in servicing loans - receiving checks, issuing statements and related processes that the government would outsource. BND has been working with the state congressional delegation to keep the bank involved in college lending under a new law.

"At the end of the day, the Bank of North Dakota will continue to have a significant role in student loans in the state," Hardmeyer said. "Obviously, we've been at this longer than anyone else."

(Reach reporter Christopher Bjorke at 250-8261 or chris.bjorke@bismarcktribune.com.)