The Hill reported today that the student loan industry is ramping up activity to oppose the Obama administration’s loan reforms, and “pushing alternatives to maintain a grip on some portion of the multibillion-dollar business”:

The industry is in the middle of a major push, with some prominent Democratic lobbyists on its side, to stall momentum for the Obama plan…Industry groups latched onto an estimate from the nonpartisan Congressional Budget Office (CBO) requested by Sen. Judd Gregg (R-N.H.) that showed under high-risk scenarios the House bill would save $47 billion over 10 years.

Currently, the government subsidizes student loan companies to originate and service loans, while guaranteeing loan repayment up to 97 percent, which generates huge profits for the loan industry with very little risk.

The administration’s plan, which has been approved by the House Education and Labor Committee, would cut the middlemen out and have the government lend directly lend to all students, instead of just some. According to traditional CBO scoring, this plan would save taxpayers an estimated $87 billion over ten years (or $47 billion, using the CBO’s “market risk” score requested by Gregg).

As Higher Ed Watch pointed out, by embracing the CBO score that Gregg requested, both Republicans and the student loan industry seem to have inadvertently “conceded that Direct Loans are much cheaper than [subsidized private] loans, and that continuing the FFEL program, rather than transitioning to 100 percent direct lending, would cost taxpayers an extra $47 billion over ten years.” Either way, the scores prove that direct lending is a less expensive way of providing financial aid to students.

As the New York Times’ editorial board wrote, the lender subsidy program is “wasteful and all-too-corruptible“:

It was created at a time when the college loan business wasn’t big enough to attract enough lenders. The subsidies long ago became unnecessary. But lenders, who reaped enormous profits, and free-market enthusiasts have zealously defended the program…The goal of the student lending program is to make college more attainable. By embracing these changes — and eliminating an unnecessary federal subsidy — Congress can promote that goal and save taxpayers nearly $50 billion over the next decade.

Indeed, the lenders have a vested interest in protecting their taxpayer guaranteed profits, but in terms of doing what’s best for students — and what’s best for the federal budget — it makes no sense to preserve the current system.

Last night, news broke that the “cash for clunkers” program — which provides vouchers of up to $4,500 to consumers who trade in gas-guzzling cars for more fuel-efficient models — was running out of cash due to much higher than expected demand. It took only six days for the program’s $1 billion budget to be exhausted.

Evidently, Rep. Michele Bachmann (R-MN) feels that a program proving to be more successful than anticipated reveals the government’s incompetence:

Rep. John Boehner (R-OH) said the same thing, stating that “there are a lot of questions about how the administration administered this program. If they can’t handle something as simple as this, how would we handle health care?”

The initial proposal for the cash for clunkers program included $4 billion in funding, which Congress decided to cut to $1 billion. But besides underestimating demand, it’s hard to see how implementation of this program was mishandled.

The popularity of cash for clunkers actually shows that consumers are willing to spend, if the incentives are there. With the economy as a whole slowing its contraction, but with consumer spending still falling, programs that provide the right incentives (thus causing stimulus and preserving and creating jobs) are a good thing.

As Derek Thompson pointed out, there’s currently an “historic pent-up demand for cars…And when the government sweetens historic demand with cash guarantees, it’s easy to burn through $1 billion in a week.” Some forecasts indicate that industry-wide sales for July “could top 10 million vehicles on the annualized basis tracked by analysts.” If that happens, it would be the highest sales rate of the year.

The House voted today to infuse $2 billion of stimulus money meant for renewable loan guarantees into the program, and the Senate will vote next week. It might be worth finding the money somewhere else, though. For instance, Treasury could reprogram TARP funds, of which there are about $80 billion uncommitted, by making a request to congressional appropriators.

I noted at the time that cash for clunkers is not the most efficient way to upgrade the fuel efficiency of the nation’s auto fleet, and the environmental impact is not going to be huge, but given the economic benefits and the help in combating some traditional pollution the program is worth continuing.