Students Overcome Massive Lobbying Campaign to Win Reform

In a major victory for American college students, the healthcare reconciliation bill passed the Senate and House yesterday with student loan reforms intact. Student advocates have officially overcome the banks' intense, multi-million dollar lobbying campaign to preserve profits at the expense of taxpayers and students. From the New York Times:

Ending one of the fiercest lobbying fights in Washington, Congress voted Thursday to force commercial banks out of the federal student loan market, cutting off billions of dollars in profits in a sweeping restructuring of financial-aid programs and redirecting most of the money to new education initiatives.

The bill will bring immediate benefits to American college students. Ending bank subsidies has freed up funding for the single largest increase in student aid, ever, which will come through a variety of channels: increases in Pell grants, lower monthly payments, a shorter period before loan forgiveness kicks in, and billions for training programs. And on top of all that, the bill saves US taxpayers billions.

The unassailable logic of the bill, coupled with its extraordinary popularity, necessitated a sophisticated lobbying effort by Sallie Mae and friends. Last summer's CBO score, which highlighted the savings produced by the reforms, led to a full court press by the banks. Top Democratic lobbyists like Tony Podesta led efforts to make sure that the bill stayed out of reconciliation, where it would need only 50 votes. They sought out Democratic Senators to take up the cause of the banks, made strategic lobbyist hires, and offered alternative proposals that would protect bank profits.

In the end, only two of the six Senators profiled in our report, Money-Changers in the Senate, voted with the banks: Senators Blanche Lincoln and Ben Nelson. A third Democrat, Senator Mark Pryor, also joined the Republicans in voting no on the reconciliation bill.

Lincoln and Nelson had announced earlier in the week that they would vote no. As I have detailed in previous posts, both Senators have close ties to industry lobbyists for Nelnet, Sallie Mae, and other lenders, and had taken in significant campaign contributions from the industry in the past year.

But why did Senator Pryor vote no? There are a number of possible explanations. In a statement released yesterday, he points to problems with the healthcare portions of the bill:

However, on balance, I believe the package falls short of the criteria of making health care more affordable, reliable, and accessible. I remain very concerned about provisions that would double Arkansas’s cost of providing Medicaid to new enrollees, impose -- for the first time -- a payroll tax on unearned income, significantly increase fines for employers who may not be able to afford health coverage for their employees, and increase the cost of the legislation by $65 billion. It is because of these reasons that I cannot support this additional package.

Pryor makes no mention of the student loan reform measures in the bill, even though Lincoln, the senior Senator from Arkansas, was voting against the bill for that reason. Ben Nelson also pointed to the student loan reforms, specifically, to explain his opposition to the bill, making Pryor the only Democratic Senator to oppose the reconciliation bill for the healthcare measures it contained -- odd to say the least.

Lincoln and Pryor had stood up for the lenders in February, when they had written a letter to members of the Senate HELP committee urging them to allow Arkansas guaranty agencies to continue "playing a role" in student lending.

What is it about Arkansas and student lending? For one thing, Sallie Mae has some strong ties to the state's power structure. Diane Suitt Gilleland, the former director of the Arkansas Department of Education, is a board member. Lottie Shackelford, the former mayor of Little Rock, is a Sallie Mae lobbyist (and donor to both Lincoln and Pryor).

The state's non-profit student loan agencies -- the Student Loan Guarantee Foundation of Arkansas and the Arkansas Student Loan Authority -- also appear to have amassed some significant political power in the state. Both agencies have strong ties to for-profit student lenders. SLGFA, for instance, has relationships with Sallie, Chase, Nelnet, Citigroup, Wells Fargo, and a number of other big banks.

One bank with strong ties to SLGFA is Arvest, a major student lender in Arkansas. Chris Kromm of Facing South has pointed out that Lincoln has strong ties to Arvest through the bank's chair: Jim Walton of the Walton family. Wal-mart and the Waltons are Senator Lincoln's biggest career donor.

Pryor isn't as dependent on Wal-mart's support, but it's easy to see how the Arkansas power structure could have pushed him to register opposition to the bill.

Pryor also has strong ties to Jeffery Trinca, a Sallie Mae lobbyist who once worked in the Senate office of his father, Senator David Pryor. Trinca has donated over $5000 to Mark Pryor's campaigns over the years.

Whatever the explanation, Pryor, Nelson, and Lincoln effectively stood with Wall Street, against students, on yesterday's vote. Ultimately, in terms of policy, their votes were inconsequential. But as Congress faces more opportunities to reform the financial services industry and make Wall Street pay for its economic crimes, it will be important to consider that they stood with the banks on this vote.

Student advocates have beaten back the banks, and aid is on the way: for every banker bonus that gets slashed, thousands of students will have an easier time paying for their education. And that's a beautiful thing!

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future