Student Loan Reform

The Bank Lobbyist Behind Blanche Lincoln's "No" Vote on Reconciliation

Kevin Connor — Tue, 23 Mar 2010 14:28:05 -0400

Score one for Wall Street. The student loan industry has convinced Senator Blanche Lincoln to vote against the healthcare reconciliation bill on the grounds that it contains "matters unrelated to healthcare" -- code for student loan reform, as David Dayen notes.

How did the banks secure Lincoln's support? The same way they found other Senatorial defenders for their wasteful subsidies: the power of money, deployed through a combination of campaign contributions and strategic lobbyist hires.

In Lincoln's case, the simplest answer is Kelly Bingel. Bingel has been lobbying for the student loan industry since mid-2009, and she is extremely close to Lincoln. Bingel was the Senator's chief of staff from 2003 to 2005, and a longtime Lincoln aide before that. She has since joined Mehlman, Vogel, Castagnetti, a lobbying firm which has played a central role in the healthcare fight, lobbying for AHIP, PhRMA, and many other insurance and pharmaceutical companies.

A recent Roll Call article described Bingel as Lincoln's "alter ego,", and said that Bingel "has the ear of her former boss...first on the list of the Senator’s callbacks" according to one former colleague.

Student loan lobbyist Kelly Bingel and Sen Blanche Lincoln.

Their ties also extend beyond the professional sphere: Lincoln is the godmother of Bingel's son, according to this interview Bingel gave to her old sorority.

Ironically, considering the matter at hand, Senator and lobbyist were brought together by their college ties. Lincoln and Bingel were both members of the same sorority, Chi Omega (at different schools, however). Here is the story, as told to Chi Omega, of how Bingel and Lincoln's sorority sisterhood brought them together in DC:

While I was there, my mother, who was living in Arkansas, sent me a newspaper clipping about a young woman who had just been elected to Congress after defeating a 24-year incumbent. The young woman – Blanche Lambert - was a Chi Omega. I remember talking on the phone with my mom saying, “I’d love to meet her!” Fortunately, one of the congressmen I had covered as a newspaper reporter recommended me to Blanche. The first thing she said when she saw my resume was, “Oh, she’s a Chi Omega!” In short, Chi Omega opened the door for me to work with the woman who would be an amazingly positive influence in my life and who would become – a decade later – my son’s godmother.

All these ties have assured the student loan industry access to Sen. Lincoln, and likely swayed her to vote "no" on the reconciliation bill. Of course, the lenders paid Mehlman $150,000 last year for the privilege.

Before the release of Money-Changers in the Senate, the Campaign for America's Future report on the student loan influence game, Bingel was not yet linked to the student lending lobby. This is perhaps due to the fact that the industry used quite a daisy chain of corporate shells to hire her on to the cause.

Bingel works for Mehlman Vogel Castagnetti, which was hired by the Law Offices of John Dean on behalf of an obscure group called the Student Loan Coalition. Who is the Student Loan Coalition? It's not entirely clear, but here's a clue: Dean's other major client is the Consumer Bankers Association, whose members include Citigroup, Chase, Wells Fargo, and a number of other student lenders.

Meanwhile, Lincoln's current chief of staff, Elizabeth Hurley Burks, has strong ties to another student loan industry lobbyist: Jim Turner, formerly a Representative from Texas. Burks was Turner's chief of staff until 2005, and followed him to the lobbying firm Arnold & Porter before joining Lincoln's staff. Turner is now lobbying for Texas Guaranteed Student Loan Corp, a student loan guarantor that is an associate member of the Consumer Bankers Association.

Lincoln's ties to the student loan industry don't end there. Nebraska-based lender Nelnet only employs one lobbying firm, Avenue Solutions. There are three partners at Avenue, and one of them is Lincoln's former health policy adviser, Elizabeth Barnett. Avenue Solutions' three partners donated $10,300 to Lincoln in 2009, an average of over $3,000.

And on top of all that, Sallie Mae's PAC maxed out to Lincoln's primary account in 2009. One of Lincoln's top donors, DNC vice chair Lottie Shackelford, is a Sallie Mae lobbyist.

Arkansas isn't exactly a student loan origination boom state, so Lincoln can't say she's standing up for jobs (though that claim is a dubious one even for Senators from Sallie Mae's home state). Instead, she's talking about "transparency":

“This process that’s being used in reconciliation is a process that doesn’t have the transparency that I think Americans are crying out for,” Lincoln said, “and it doesn’t have the debate that shows the initiative of being thorough about how we do things.”

The line is reminiscent of the loan industry critique of the reconciliation bill: that student loan reform is "buried" in the healthcare bill and that the legislation was not given proper consideration by the Senate.

If Lincoln was in the slightest bit transparent about why she has chosen to oppose the reconciliation bill, she would disclose her recent contacts with Kelly Bingel and other industry lobbyists, as well as her recent campaign receipts from the industry. How illuminating it would be for the Senator to embrace transparency and say why she is taking such an unprincipled, impractical stand on behalf of moneyed interests, and against the interests of students.

I'm not holding my breath -- and then again, we already know the answer. Luckily, Lincoln is just one vote. Click here to tell your Senators to continue the fight for student loan reform!

Student Loans: The Right's Hidden Agenda

Sara Robinson — Tue, 23 Mar 2010 10:55:41 -0400

Click here for our new report on the ties between the private student lending industry and the six Democratic anti-reform Senators, and click here to tell your Senators: Don't let lobbyists gut student loan reform.

President Obama's "no-brainer" suggestion that the government get back into the direct lending business has such obvious fiscal merit that you'd think it would melt the heart of the most obdurate conservative. But it's getting resistance anyway -- which is proof that there's more than money at stake here. This proposal threatens two of the conservatives' most cherished goals; and they're willing to waste as much taxpayer money as it takes to keep us from backsliding away from the progress they've made.

The first goal is preserving privatization. The conservatives have been telling us for 40 years that there's nothing the government can do that the free market can't do better. Of course, most of us really get it now that "privatization" really means "paying 25% more for the same stuff and letting the private sector skim off the profit while sticking us with the messes." While privatization has worked well in some areas, it's been a disaster in others -- and this is one of them.

The conservatives are demanding that we pay a totally unnecessary premium for our student loan programs because a) their banking friends are pocketing a fortune off the program and b) we must not ever question the proposition that the private sector can do this better. It's just bad form, bad taste, and bad politics to suggest otherwise, even when it's patently obvious that the actual goods or services we're getting cost considerably more -- and are produced with less oversight and lower standards -- than what we used to get directly from the government. Therefore: Obama's brazen suggestion that we need to bring this program back into the public fold is outright heresy. If Americans figure out that the government really can do this one thing better than the private sector does, this piece of the conservative gospel could be called into question in other areas as well. The right will not stand for this.

The other goal -- and this is what I'm really on about today -- is all about the right wing's fundamental distrust of the middle class. One of their big takeaways from the 1960s was that giving the masses a high level of education (as the GI Bill and the generous educational subsidies to the Boomers did) is one of the worst mistakes a would-be aristocracy can make. Send 'em to college, and the next thing you know, you've got a big, boisterous, pushy middle class pouring out into the streets demanding their "rights," asking the rich to share their wealth, questioning their bought-and-paid for government policies, and devising technocratic "fixes" to problems the corporate masters really would rather ignore. You can't manipulate 'em -- they're too smart for that -- so you can't make 'em do what you want. The upshot is exactly the kind of social chaos no self-respecting plutocrat should ever let happen on their watch.

Seen this way, defunding education -- especially higher education -- for the middle class and poor was one of the conservatives' most important (and effective) strategies for pulling the plug on the whole postwar progressive project. Best of all: over time, it blunted the influence of that despised class of degreed professionals (journalists, lawyers, accountants, engineers, biologists, etc. etc. etc.) who once aggressively monitored private industry on behalf of the public interest. Without those watchful eyes and ears, it got much easier for corporations to do whatever they pleased.

* * *

This essential hostility to higher education is the basic reason that there are now only two avenues left for a smart poor or middle-class kid who wants public help to get through college. The first is to sell your soul. The second is to sell your body.

Soul-selling means taking on private student loans at interest rates so bogglingly high that you'll be up to your to eyebrow piercings in debt until you're 40. Once you're out of school and dragged down by that six-figure debt, they've got you trapped. The only way to afford an education is to sell your ideals for a corporate job you wouldn't have taken in your worst nightmares otherwise.

Sorry, young lawyer; you can't afford to become a public defender. It's got to be corporate law for you. Too bad, young doctor; you might want to join the Peace Corps or work in a ghetto clinic; but you need that HMO paycheck to keep up with the loan payments. And you, young wonk -- you want to take a job with a non-profit defending workers' rights? Hah! Not if you ever want to own a home or have kids. You can have a paycheck and a life, or you can have your principles. But if you want a college degree, you can't have both.

That's one way to tame the upstart rabble. The other way is to demand that you underprivileged brats first join the military and put life and limb on the line in the service of the empire -- an experience that they reckon will make you safe to educate (assuming, of course, that you survive it at all, or aren't rendered senseless by a TBI). You'll be inducted into the military-industrial complex, indoctrinated in the conservative (or perhaps even fundamentalist Christian) worldview, broken of any insurrectionist tendencies, and rendered obedient and disciplined enough that any of that commie-fascist-terrorist liberal arts stuff they'll try to teach you later on at college will be less likely to stick.

Sell your soul? Or sell your body? To the conservatives, the idea that you're worthy of an education merely because you're intelligent and hard-working and have something useful to contribute to society just isn't enough any more. But if you're willing to forego something intrinsic to your ability to function as a happy, healthy adult, we'll reluctantly punch your ticket.

* * *

Thing of it is: it wasn't always like this. And if we want to still be a global power 15 years from now, it has to change.

The only reason any of this is even up for debate right now is that the GI generation is all over 80, or dead. If our grandparents were still around, they'd be busting us upside the head for our bone-ignorant stupidity on this issue. They knew, from their own experience, that the GI Bill was without a doubt the best investment this country had ever made, going all the way back to the Louisiana Purchase.

Back in the glory days of the American consensus, most of the country -- from the moderate right to the far left -- agreed that anybody with the talent and desire should have access to an education. Ideally, it shouldn't matter who your family is, how much money you have, or where you come from. None of that should be a barrier to fulfilling your ambitions. The fact that minorities didn't attend college in equivalent numbers to whites was considered a shame and a scandal (and prompted school desegregation fights and affirmative action laws). Guidance counselors spent a lot of their time showing poor kids all the ways they could pull together funding -- much of it from the state and the feds -- and make their college dreams come true. Success stories of kids from sharecropping families going to Harvard and smart boys from coal mining towns in West Virginia becoming rocket scientists became almost commonplace. After all: this was the whole country's story. (It was even mine.)

Furthermore, the new GI middle class earnestly believed that their Boomer and early Gen X kids deserved even better. In most parts of the country, they built a kindergarten-through-PhD educational system that offered a high-quality education to anybody -- not just veterans -- who wanted one. When Sputnik terrified the nation in late 1957, the first panicked response was to throw vast sums of money at science education, at every level from kindergarten onward. That investment, in turn, directly produced the young tech wizards who created the computer boom of the 70s and 80s -- the single biggest economic generator in the history of the world.

In addition to creating postwar America's technological and cultural might, that massive investment in higher education paved the way for a large, progressively-minded middle class that dealt effectively with complex issues, built global enterprises, understood and relied on science, craved a deeper appreciation of the arts, and was fully capable of building anything it put its imagination to. Without the engineers and scientists educated by the GI Bill and the postwar investments in education, there would have been no semiconductors, no satellites, no polio vaccine, no Internet, and no moonshot.

The conservatives look back at all this, and all they can see is the chaos of the 1960s. What they don't see -- because their fear is blinding them to the full picture -- is how much of their own wealth and power also flowed out of that massive investment in American talent. For three generations, those investments have consistently returned tax revenues, technological innovations, economic growth, and social benefits worth many, many times more than what we put in up front. There is simply no other place we can put our tax dollars that can guarantee a higher ROI.

Given the stakes -- which are nothing short of the future of the country -- it's quite possible that the way the conservatives have changed our national consensus on education may be the single most radical thing they've done over the past 30 years. (And yes, that includes sanctioning torture, which wouldn't have been even possible if we hadn't deprived two generations of Americans of a decent civics education.) Those of us over 45 still remember those very differnt assumptions about who deserved an education, and what college was for, and how it should be paid for. We're absolutely horrified at the way those assumptions have been turned on their heads. Everybody should be.

It's time for us to turn those assumptions back upright again. The generation that will be figuring out how to make this country work again deserves to have the same wide-open opportunities their Boomer parents and GI grandparents did. Our very survival may depend on their access to cutting-edge education. Depriving them of the chance to go to college -- or warping things so they can only get there by selling their bodies or souls to the corporate order -- isn't just morally wrong. It's also a conscious choice to disinvest in the future of the country, sealing our fate as a second-rate power in the century ahead.

There is nothing "conservative" about walking away from this kind of sure-fire 1-to-100 investment. There is nothing "conservative" about enslaving our best and brightest -- the kids who will create our next future -- to serve as mere cash cows for the big banks. There is nothing "conservative" about paying 25% more for something just so somebody's discredited free-market fundamentalist faith will be served. There is nothing "conservative" about squandering 500 years of American civilization and progress by failing to pass it on, fully intact, to the next generation.

There may be some confusion in Washington right now over what the "right thing" looks like here. But the student loan traps that have ensnared Gen X and the older Millennials are stark and current evidence of what the "wrong thing" looks like. And the brilliant success of the GI and Boomer educational experience leave no doubt about what needs to be done to put it right.

This really is a no-brainer. Let's tell the conservatives that their ideas are out of date and wrong -- and then get the government back in the business of investing directly in our kids, and our future.

New Report: How Student Lenders Enlisted Senators to Fight Reform

Kevin Connor — Tue, 23 Mar 2010 07:22:17 -0400

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 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."

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, private golf courses — 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. 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, 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.

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. 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!

Money-Changers In The Senate

Isaiah J. Poole — Mon, 22 Mar 2010 11:55:10 -0400

The student loan industry faces a serious challenge from advocates who question the reason for its existence, which is premised on massive, inefficient government subsidies.

Leading student lender Sallie Mae reported profits of $324 million last year on the strength of its student loan business, which is heavily subsidized through the Federal Family Education Loan program (FFEL). Sallie Mae originated $21 billion worth of loans backed by the program in 2009; other major lenders profiting from the program include Citigroup, Nelnet, JP Morgan, and Wells Fargo.

Meanwhile, by ending the program with the Student Aid and Fiscal Responsibility Act (SAFRA), the Congressional Budget Office estimates that the federal government would save $68 billion—money that would otherwise subsidize these banks' profits. The CBO score also estimates that students would pay significantly lower interest rates on their loans.

With billions in profits on the line, banks have waged an intensive, multimillion-dollar political and lobbying campaign to maintain the status quo: subsidies for the banks, at students' expense.

Their expensive campaign has won them some support. On March 9, six Democratic senators—Blanche Lincoln, D-Ark.; Mark Warner, D-Va.; Tom Carper, D-Del.; Ben Nelson, D-Neb.; Bill Nelson, D-Fla., and Jim Webb, D-Va.—sent a letter to Senate Majority Leader Harry Reid to make him "aware of our concern" about reform efforts and urging consideration of "potential alternative legislative proposals."

What would prompt six senators to oppose efforts aimed at reducing lending costs by cutting out superfluous money-changers? The answer, of course, is the power of money, as deployed through a combination of campaign contributions and strategic lobbyist hires.

This report documents the extensive ties between the six senators and major players in the student loan industry. Among the findings:

The report estimates that the student loan industry has spent $15 million in the past year on a political campaign to rescue multibillion-dollar profits. Banks have waged an expensive and sophisticated battle to defeat SAFRA with campaign contributions, lobbying of congress and the CBO, help from major industry associations, and shadowy front groups to escape accountability.
At least six former staffers to the six Senators who signed the letter to Reid are currently lobbying for the student loan industry: Kelly Bingel (former chief of staff to Blanche Lincoln); Bill Leighty (former chief of staff to Mark Warner); Amy Tejral (former legislative director for Ben Nelson); Oscar Ramirez (gubernatorial campaign staffer for Mark Warner); Timothy Casey (legislative aide to Tom Carper); and Paul Brathwaite (Carper staffer).
Lenders have employed front groups to lobby on their behalf. The Business Roundtable, the Consumer Bankers Association, the American Bankers Association, and the Chamber of Commerce (including CEO Tom Donohue) have all lobbied around student aid reform on behalf of unidentified lenders. Major lenders associated with these groups include JP Morgan, Citigroup, Wells Fargo, Sallie Mae, and Bank of America.
Student lenders and their lobbyists have showered the six senators with tens of thousands in campaign contributions over the last year, including $15,000 from the PACs of Sallie Mae and Nelnet alone. In the past, the senators have also been top recipients of loan industry largess: Sallie Mae and Nelnet both maxed out to Bill Nelson in the space of three days during his 2006 campaign; two of Tom Carper's three top career contributors are JP Morgan and Citigroup -- both major players in the student loan industry; Ben Nelson has received $19,000 from Nelnet's PAC in the past ten years.
Jim Webb, Carper, and Ben Nelson sided with banks, and against students, on a key education measure in 2007. Nelson also sponsored a failed 2007 amendment that would have maintained government subsidies to private student lenders.

The report documents a host of additional ties between the six senatorial defenders of the status quo and the main organs of the student loan industry.

Given that deeply indebted students and young adults have little discretionary income to devote to catered dinners for senators and campaign coffers, we can only hope that transparency and accountability will balance the scales.

Don’t Let Them Kill Student Loan Reform

Armand Biroonak — Thu, 11 Mar 2010 15:36:41 -0500

Something so simple, so easy: end tens of billions of dollars in bank subsidies to the private lending industry and return much of the savings back into the hand of students, with the Department of Education providing loans to students directly. A no-brainer right? Well reform may be a no-go, if six Senate Democrats have their way.

Senators Ben Nelson (D-Neb.), Bill Nelson (D-Fla.), Blanche Lincoln (D-Ark.), Tom Carper (D-Del.), Mark Warner (D-Va.), and Jim Webb (D-Va.) all have expressed concerns about student loan reform (known as the Student Aid and Fiscal Responsibility Act) and urge for alternative proposals in order to protect lenders and jobs in their states. Fair enough, job losses –especially now –are never a good thing. However, even with reform, private lenders (that employ only around 30,000) will still play a big role in servicing loans –so job losses will be minimal or even increase with greater loan volume looking down the road. Click here for more common myths about student loan reform.

And how about the concern for students too? Students cannot afford to wait any longer, they need help now. Under reform legislation, the Pell Grant maximum would increase, thus allowing thousands more students to become eligible for aid. And making college affordable could not come at a better time. The average student debt has ballooned to over $23,000. Take a look at the increase in tuition over only the past two years at state universities for those Senate Democrats that stand in the way:

Univ. of Nebraska: over 11%
Univ. of Florida: 30%
Univ. of Arkansas: 7%
Univ. of Delaware: 16%
Univ. of Virginia: 14%

So who are some members of Congress really siding with? Students? Or Banks? Help make your voice heard here and tell the Senate to finish what the House already did, and pass student loan reform NOW!

The Last Obscenity: Will the Bank Lobby Succeed in Screwing Poor Kids?

Robert Borosage — Thu, 11 Mar 2010 10:30:31 -0500

It is, as President Obama stated, a "no-brainer." Cut the $90 billion in subsides that go to banks to make risk-free student loans that are GUARANTEED BY THE GOVERNMENT, go to direct lending, and use the money saved to increase Pell grants and tuition tax credits for working families so more poor kids can afford college. $90 billion over 10 years isn't bubkas.

The banks, of course, mobilized to save their subsidy. Republicans, led by Sarah Palin, denounced the "government takeover." But shoveling out an extra $90 billion to private banks to make risk free loans that the government guarantees isn't exactly the free market. This is the most egregious form of crony predatory capitalism that Adam Smith would condemn.

So the bill passed the House easily. And it was put in reconciliation instructions in the Senate—so it only needs 50 votes. Piece of cake.

So the banks enlisted big-time Democratic lobbyists and spent millions. They mobilized employees to pressure senators, arguing that they would lose their jobs. (Actually most of the jobs would still be there as the loans would continue. It is just the subsidies to bank profits that would eliminated.)

Now six senators—WHO SHOULD HEAR FROM YOU—have announced their opposition to voting on the student loan package in the reconciliation bill:

Blanche Lincoln of Arkansas (no surprise there)
Ben Nelson of Nebraska
Bill Nelson of Florida
Thomas Carper of Delaware
Mark Warner of Virginia (so much for New Dems)
Jim Webb of Virginia

What do six senators matter when we only need 50 votes? Because health care needs every vote it can get to pass the "fix" in reconciliation. If a couple of these folks say they won't vote for reconciliation if student loans are in the bill, the leadership, desperate to get health care done, will drop student loans.

This will be the final obscenity: The bank lobby so strong and the Democrats so weak that even a "no-brainer" taking unearned subsidies from banks and giving them to poor kids can't pass.

Despair for the Republic. This, folks, is simply ugly.

Backgrounder: The Student Aid And Fiscal Responsibility Act

Armand Biroonak — Tue, 09 Feb 2010 23:42:40 -0500

Facts You Should Know

Tuition and fees have increased more than 60 percent (adjusted for inflation) since just 2000.
Average student debt is now over $23,000, a 24 percent increase since 2004.
In the 2008-09 academic year, student borrowing grew about 25 percent over the previous year, to $75.1 billion.
The U.S. now ranks near the bottom among industrialized nations in the percentage of 25-34 year olds with an associate’s degree or higher.
One in five American students pursuing a bachelor’s degree never finish.
In 1977, the maximum Pell Grant covered 77 percent of total public college costs. Now, it has dropped to 32 percent.
Between 1.4 million and 2.4 million bachelor’s degrees would be lost this decade among college-qualified high school graduates as a result of financial barriers.

The Student Aid and Fiscal Responsibility Act seeks to provide relief to millions of students, parents and workers struggling to obtain a college degree or training for a better job.

The maximum Pell Grant would increase to $5,500 in 2010 and $6,900 in 2019 as a result of a $40 billion investment in the program. As a result, several hundred thousand more students would qualify for aid and, with that, the opportunities that a degree will afford them.

The Perkins Loan program would be strengthened under SAFRA. These are low-cost loans available to adults, and the legislation would allow students who need additional aid to work with their schools to get these loans from the federal government instead of risky private loans.

Community colleges and worker retraining get new funding under SAFRA. The United States is projected to have a shortfall of 16 million college graduates by 2025. SAFRA will revitalize community colleges by updating facilities and creating free and accessible online curriculum, as well as building partnerships between schools and businesses.

All federal student loans would be awarded through the Direct Loan program as a result of SAFRA. That more efficiently utilizes the government’s education dollars. This reform in studentlending eliminates borrowers’ dependence on market conditions, while also saving $87 billion to invest back in education support and reducing the deficit.

SAFRA would keep interest rates low for lower income students and their families who qualify for subsidized Stafford loans by applying a variable rate beginning in 2012, rather than increasing them from 3.4 percent to 6.8 percent.

The Free Application for Federal Student Aid (FAFSA) form would be simplified. By reducing the number of questions on the form, students and families would encounter fewer potential roadblocks to their getting aid.

Finally, historically black and minority-serving institutions would be boosted with a $1.2 billion investment under SAFRA to support college access and completion among disadvantaged students.

A College Test for Washington: Help Young People in Need, or Kowtow to Bank Lobbyists?

Richard Eskow — Tue, 09 Feb 2010 16:11:29 -0500

It should be, as the President once called it, a "no-brainer": Overhaul our broken system for distributing federal student loans. Stop giving banks undeserved profits for administering these loans (an estimated $80 billion over ten years), since they take no risk and have managed the program poorly. Make sure our money goes directly to the young people that need them the most. Who could be against that? In fact, the student loan reform bill has already passed the House.

Yet, in an ugly replay of the lobbyist feeding frenzy that accompanied health reform, this initiative is being undermined in the Senate by highly paid K Street bank operatives. This is a test case: If Washington can't overcome lobbyist influence enough to do the right thing for our country's young people, it will be a public spectacle. Any politician who fails to fight for this program will be hurting themselves politically and punishing college students financially, leaving those students in the hands of rapacious and corrupt lenders.

It's a simple, multiple-choice test for Washington politicians: Do you choose a) fight for the banks, or b), fight for students and their families? Your answer will be graded on Election Day.

It's not like the banks have distinguished themselves in administering these loans. Consider this: After an investigation in New York, "six schools agreed to return payments they had received for steering students to lenders." As the New York Times observed in 2007, "a senior official at the Department of Education who helped oversee the federal student loan program held shares of the parent company of the student loan company Student Loan Xpress." Adds the Times, "Financial aid officers are offered gifts and trips, and universities are offered hundreds of thousands of dollars in payments, if they place a company on their list of preferred lenders ..."

We'll be better this time, lenders assure us. In a recent Times story, bank officials and lobbyists argued that after reform passes students will receive less "counseling," described as one-on-one sessions in "high school gyms." But according to conversations I've had with students, these sessions have been more like sales pitches. (I wonder if a bank "counselor" has ever advised a student to revise her or his plans and attend a state school where loans might not be necessary.)

Although the Times dutifully reports these and other claims from the bank lobby, its editorial board rightly describes them as "scare tactics and distortions."

This misleading and heavy-handed lobbying effort is being led by Sallie Mae, which is the country's biggest provider of student loans. Sallie Mae should be the poster child for everything that's wrong with simplistic notions of "privatization." It was created in 1972 as a government-sponsored enterprise and began privatizing in the late 1990s. How is that working out for us? It spent $8 million on lobbying last year.

Like other lenders, Sallie Mae's big on influence peddling. As the Times reports, "Political action committees for the lenders and company employees made $2.1 million in political contributions last year, with the money split evenly among Democrat and Republican candidates ... Sallie Mae's PAC alone made $194,000 in donations." And, "Sallie Mae and other lenders have staged a series of town-hall-style meetings at their job centers around the country."

So a corporation created by the government, that earns its billions through guaranteed government loans, was turned into a so-called "private enterprise" without any of the risks usually associated with that term. Now it's using our money to influence our leaders to act against our interests -- while at the same time running tea-party-like scare sessions. Sallie Mae became a zero-risk, get-rich-quick venture for its executives. Then it turned rogue, leading the effort to shortchange the very students it was designed to serve.

That $80 billion in bank profits could be redirected to do great things. Under the House bill it will provide more in direct loans and encourage students to enter public service in return for debt forgiveness. It will also help establish $10,000 tax credits for families that have gone into debt to help their kids get ahead.

Or, if Sallie Mae and friends have their way, maybe it will be used to pay more billions in banker bonuses.

In a replay of health care lobbying tactics, bankers also claim this is a "government takeover." (Call it Death Panel II.) But there's no "takeover." Loans would be administered directly by schools, not "faceless bureaucrats." Lobbyists have also been threatening Senators from states that employ call center workers servicing these loans. But call center workers will be needed for direct Federal loans, too.

A grassroots movement could help turn the tide. You can click here to tell your Senator to support student health reform. And it's not just the Senate. The President's credibility is on the line, too. When he announced the program last fall he promoted it in the strongest possible terms, including the "no-brainer" comment. The nation watched as health reform was shredded by lobbyists as if it were a fat cow tossed into a pool of raging piranha. Will this Presidential initiative be next?

Politicians bailed out Wall Street. If they fail to bail out the country's college students and their families, the picture won't be a pretty one. Words won't be enough; the public expects action. Elected officials need to prove they're not in Wall Street's pockets, and that they'll stand up for regular people. Washington needs to demonstrate that it can be as effective in fighting for student loan reform as it was in fighting for the bailout.

After all, if a student's dreams of a better life aren't "too big to fail," nothing is.

Click here to demand that your senators side with students, not big bank lobbyists.

Tell The Senate: Stand With Students. Not Sarah Palin's Big Bank Buddies.

Bill Scher — Tue, 09 Feb 2010 11:27:02 -0500

Right now, we taxpayers give big banks billions to subsidize their student loans. Giving big banks money is decidedly unpopular after the TARP bailout, among liberals and conservatives. So you'd think there would be consensus to end the subsidies.

Apparently not.

After the House passed President Obama's proposal to end the subsidies, offer students direct government loans and save taxpayers $80 billion, the Senate has the bill in limbo while bank lobbyists swarm the Capitol.

And now, Sarah Palin and the Tea Party is taking all their anti-bank populist rhetoric, and using it to support ... the banks.

At last weekend's Tea Party conference, Palin deliberately conflated ending the bank subsidies with the bank bailout:

The list of companies and industries that the government is crowding out and bailing out and taking over, it continues to grow. First, it was the banks, mortgage companies, financial institutions, then automakers. Soon, if they had their way, health care, student loans.

Quite the litany of conflation actually. She packed about a bakers dozen of lies into three sentences. But allow me to focus on just one.

Just as Frank Luntz counseled conservatives to kill the Consumer Financial Protection Agency that would rein in the banks by illogically linking it to bailing out the banks, Palin is trying to kill the end of bank subsidies for student loans by illogically equating it with more subsidies for banks.

There's only one way to beat this phony populism: real populism.

It's time to speak out and tell the Senate to pass student loan reform.

Campaign for America's Future has set up a simple online tool so you can do just that.

The choice is simple: $80 billion for Sarah Palin's big bank buddies? Or to make college affordable for the middle-class.

It's up to us to make that choice clear to the Senate.

Subsidies for Big Banks or College for Kids: WIll Senate Blow This?

Robert Borosage — Fri, 05 Feb 2010 06:43:03 -0500

The president rightly calls it a "no brainer." Direct lending to college students that saves $90 billion in excess subsidies to big banks and uses it to pay for college grants for poor kids and tax breaks for working families to help pay for tuition. This isn't complicated. The House passed it overwhelmingly last year.

But according to the New York Times -- http://is.gd/7Kuix -- it may be in trouble in the Senate. The banks, bailed out by taxpayers, are spending millions on big-time Democratic lobbyists to kill the reform.

Let's be clear on the choice. The government now wastes $90 billion in a true scam: subsidizing big banks to make loans to college students THAT THE GOVERNMENT GUARANTEES ANYWAY. The banks make out like bandits. They were exposed bribing college loan programs to give them monopoly position. Then they gouge students, rivalling credit card companies for imposing hidden fees and harsh penalties for late payments. They make tons on collections from students who have lost their jobs, even after the government pays off the loan. And, when the finanical crisis hit, the banks abandoned the program, forcing the government to step in to insure that millions of students would not have to drop out of school.

Alternatively the government could continue direct lending, and that $90 billion over ten years could go to Pell Grants for poor kids, tax credits for working families to help pay college costs. This is not a hard choice.

But money talks in the Senate bigtime. And Democratic lobbyists -- like former Clinton official Jamie Gorlick -- have no shame. Gorlick hilariously says the White House is reluctant to make Senators make a vote that "is very unpopular" in their states. This gives new meaning to the phrase "no brainer."

Let's see vote for poor kids over big banks. An unpopular vote?

Direct lending doesn't need 60 votes. It is part of reconciliation and can be passed with 51 votes. If Democrats cannot round up 51 votes in the Senate to favor helping poor kids go to college over subsidizing big banks, they are too lame to save.