Republicans And Banks Complain That Student Loan Reform Is ‘Rampaging Through The Senate’

According to The Hill, Senate Democrats are likely to pair the health care reform provisions that they are moving through the budget reconciliation process with the student loan reform bill that passed the House last year. The Student Aid and Fiscal Responsibility Act of 2009 (SAFRA), which would cut federal subsidies to private lenders, has been stuck in the quagmire of the Senate and is the subject of a multi-million dollar lobbying campaign led by Sallie Mae. Including it in the reconciliation package would prevent the measure from being filibustered.

Reconciliation instructions for student loan reform were part of the last budget resolution, so the necessary pieces to take this step have been in place for a while. But of course, Republicans and the lenders are crying foul:

– “Let’s assume the Senate bill does mirror the House bill in eliminating all private lending — that’s a nonstarter for a lot of Republicans,” said Craig Orfield, Republican spokesman on the Senate Health, Education, Labor and Pensions Committee.

– “We don’t like that this is rampaging through the Senate without the benefit of one hearing,” said an industry lobbyist.

It’s quite remarkable how adamant Republicans are about protecting billions of dollars per year in direct government subsidies to a private industry. But let’s look at the crux of the argument against reform, which is that it constitutes a “Washington takeover” of the lending industry and that the bill will cause student lenders to shed jobs.

The first charge is pretty silly, as billions in subsidies and assumption of nearly all the loan risk makes lending practically a government program already. And as the Washington Monthly’s Daniel Luzer pointed out, since private companies will still be servicing the loans, “it looks like direct lending might actually bring more jobs to America.”

Of course, it’s not really fair to pin all of the blame for stalling SAFRA on the Republicans, as there are a bunch of Democrats from states that the lenders call home who have expressed hesitation about the bill. The investment research firm Height Analytics predicts that seven Democrats will oppose the bill, and that they will come from Pennsylvania, Indiana, Florida, Nebraska, Virginia, and Delaware.

Those wavering Democrats might ultimately prevent SAFRA from being included in the reconciliation package, as the Democratic leadership doesn’t want to risk losing yea votes for health care. But that would mean SAFRA would either face a filibuster, or have to wait until next year’s budget resolution to move forward. And with student debt at a record high of $23,200 per student, and the nation facing budget deficits for the next decade, there’s really no excuse for continuing to waste taxpayer dollars on lenders that are the unnecessary middlemen between students and their education.