It's Long Past Time For Federal Student Loan Reform

It's a shocker, I know, but once again it looks like the U.S. Senate - aka, "the place where good legislation goes to die" - is holding up a common-sense reform that already passed the House of Representatives by a wide margin. Courtesy of Matthew Yglesias, here's the current state of play on efforts to reform student loans.

SAFRA, the Democrats’ long-standing and excellent plan to stop giving private student loan agencies a pointless subsidy and plow the savings into expanding the pool of tuition aid, sailed through the House months ago but has been stalled out in the Senate. The problem is that when you combine the 100 percent GOP lockstep opposition to everything with the fact that any effort to curb unjust subsidies hurts a local industry in someone’s state, it’s basically impossible to ever get 60 votes for public interest reform of this sort. The solution is reconciliation, and now it looks like SAFRA will be rolled into the health care reconciliation sidecar.

This is excellent news...

I agree, that is excellent news, and I would certainly hope to see the Senate pass this soon. Unfortunately, as the New York Times reports, even a "no brainer" (President Obama's words) like taking "billions of dollars from the profits of private lenders and giv[ing] it directly to students" can get hung up in Congress. Why? Follow the money.

Sallie Mae, a publicly traded company that is the nation’s biggest student lender with $22 billion in loans originated last year, led the field in spending $3.48 million in federal lobbying in 2009, an increase from $3.2 million in 2008, and other lenders spent millions of dollars more, according to an analysis prepared for The New York Times by the Center for Responsive Politics.

[...]

“We anticipated this,” Arne Duncan, the education secretary, said of the lending industry’s lobbying efforts. “They’ve had a sweet deal. They’ve had this phenomenal deal that taxpayers have subsidized, and that’s a hard thing to give up.”

Private lenders get a cut of the federally backed loans that they originate and service, with little risk of their own. At Sallie Mae, lobbyists for the firm are focusing on senators regarded as fiscal conservatives, as well as those in states that are home to lending centers with jobs at stake, including Florida, Illinois, Nebraska, New York and Pennsylvania, said John F. Remondi, chief financial officer for the company.

One state not mentioned in the New York Times article is Virginia, headquarters of Sallie Mae (in Reston). Over the years, Sallie Mae has been very generous with its donations, including to Virginia politicians. An interesting sidenote: Karl Rove "calls out" former Rep. Tom Davis "for trying to get Jeanemarie Devolites (now Jeannemarie Devolites Davis) appointed to the board of student loan giant Sallie Mae."). Now, presumably, Sallie Mae wants a quid pro quo - help in stopping legislation that would end the sweetheart deal they've been getting for years.

What piqued my interest in all this, other than the fact that this legislation could be coming up for a vote soon, is this Daily Kos article, which calls out Jim Webb and Mark Warner as "assholes" (his word, NOT mine!) for supposedly being 2 of the 6 Senate Democrats who are "stand[ing] in the way of progressive legislation that would save the federal government $87 billion over a decade and improve life for college students - most particularly, lower-income students." Now, being a Virginia Democrats who strongly supported the election of both Jim Webb and Mark Warner, this made me want to find out more. Last night, I contacted Webb's and Warner's office. As of this morning, I had heard back from Webb's office, but not (yet?) from Warner's. Here's what Webb's office had to say:

The letter simply suggests that reform be considered in a thoughtful manner—mindful of protecting local jobs. The Senators’ letter also acknowledges the need for federal student loan reform to protect tax dollars and enhance higher educational programs. From our standpoint, to suggest anything more is to overstate the intent of the letter.

I'm also told that "[Senator] Webb is 100% committed to education reform." That's good to know, and I hope to see him pushing for this in the near future. I also remain highly interested in hearing what Sen. Warner's office has to say on this subject. I'll let you know if and when I do, but obviously I hope Sen. Warner agrees that it's (long past) time for federal student loan reform.

UPDATE: Here's Mark Warner's statement.

Senator Warner wants to see reasonable and comprehensive reform, maximizing the resources actually available for student loans by streamlining the way we are paying lenders to originate and service these loans. Obviously, he also wants to make sure that we protect as many Virginia jobs as possible in the process. So, to put it simply, Senator Warner joined his colleagues on this letter to clearly state
his commitment to work to make sure that funding, and quality of service, are maintained for those students who rely upon the federal student loan program.