New Report: How Student Lenders Enlisted Senators to Fight Reform

As the healthcare bill moves to the Senate for consideration under the reconciliation process, the fight to block real reform continues — for bank lobbyists, at least.

The healthcare fix-it bill approved by the House on Sunday night includes student loan reform legislation that would end wasteful subsidies to lenders like Sallie Mae, Citigroup, and JP Morgan. But even as healthcare reform appears to be a done deal, there are signs that the student loan industry still has powerful defenders inside the Senate.

Two weeks ago, a group of six Democratic Senators — Mark Warner, Blanche Lincoln, Tom Carper, Bill Nelson, Ben Nelson, and Jim Webb — wrote a letter [1] to Senate majority leader Harry Reid raising concerns about the legislation. The letter reads in part:

We write to make you aware of our concern with provisions of contemplated student lending reform that could put jobs at risk. Increasing our nation's commitment to higher education funding is a priority, but we must proceed toward this objective in a thoughtful manner that considers potential alternative legislative proposals, while still delivering an equivalent amount of savings over the next ten years.

Why would these Senators step forward to defend a wasteful, inefficient system that pads bank profits at the expense of college students?

That's the question I attempted to answer in a report released today by the Campaign for America's Future, titled "Money-Changers in the Senate: How the Student Loan Industry Enlisted Senators to Fight Reform and Protect Profits." [2]

The report estimates that the industry has spent $15 million fighting the Student Aid and Fiscal Responsibility Act (SAFRA). It details how the banks have mounted a massive campaign to fight legislative reform and preserve the status quo: billions in profits, company jets [3], private golf courses [4] — and predatory interest rates for America's college students.

As part of the campaign, the industry developed a sophisticated political strategy that targeted potential sympathizers in the Senate, including the six Senators who signed the letter to Reid. The industry showered them with campaign contributions and made a number of key lobbying hires in order to open lines of communication with their offices.

Sallie Mae's PAC maxed out to Senator Blanche Lincoln's primary account in 2009, and Nelnet, another lender, gave $4000 to Ben Nelson in 2009 alone, on top of another $15,000 it has given him over the course of his career. Two of Tom Carper's top three career contributors are JP Morgan and Citigroup, both major lenders, and Sallie Mae's PAC has given him $13,500 over the past ten years.

The report also identifies six of these Senators' former staffers who are now lobbyists for the student loan industry. The lobbyists have used their relationships with their old bosses to ensure that the Senate looks out for the student loan industry's agenda, even if it comes at the expense of millions of students. Carper, Warner, Lincoln, and Ben Nelson all have former staffers lobbying for the student loan industry.

The lenders enlisted top Democratic insiders like Tony Podesta to help devise this strategy. Last summer, Podesta partied with Carper and Lincoln on Martha's Vineyard [5]. He has donated to five of the six Senators who wrote to Reid, as has Sallie Mae lobbyist Niles Godes, a former staffer to Kent Conrad and Byron Dorgan.

For the banks, Senate rules were a major concern — the lobbyists' main objective was to keep SAFRA out of reconciliation, where the bill will only need 51 votes in the Senate. So they hired an expert in Senate rules: Martin Paone [6], the Democratic Secretary of the Senate under Harry Reid, who is now a lobbyist at Prime Policy Group.

The report notes that the industry has also used a number of industry associations and shadow groups to fight reform. The Consumer Bankers Association, the Business Roundtable, the American Bankers Association, and the Chamber of Commerce have all lobbied against student loan reform. The groups enlisted lobbyists on behalf of their members, which include Sallie Mae, JP Morgan, Citigroup, and other major lenders.

Even Chamber CEO Tom Donohue got in the act, personally lobbying against SAFRA, according to the business lobby's disclosure reports.

Another shadowy group called the "Student Loan Coalition" hired John Dean, a longtime lobbyist for the student loan industry. Dean then hired a group of lobbyists at Mehlman Vogel Castagnetti who have spent the past year lobbying on behalf of health insurance and pharmaceutical interests — including Senator Blanche Lincoln's former chief of staff, Kelly Bingel [7].

If the industry has an endgame, these lobbyists are sure to be a part of it, as student loan reform gets considered alongside healthcare as part of the reconciliation process.

To get an idea of the firepower behind the industry's campaign, check out the full report [2]. I will also be blogging here throughout the week to highlight findings and give some context to reconciliation negotiations.

The lobbyists aren't taking a break, and we can't either.

Click here to tell the Senate: don't let lobbyists gut student loan reform! [8]