Last week, after President Obama called for its passage in his State of the Union address, Pedro de la Torre noted that the the Student Aid and Fiscal Responsibility Act (SAFRA), “has stalled in the Senate because of the long and cantankerous health care debate and a multi-million dollar lobbying and PR campaign by student loan companies.” Indeed, as the New York Times reported today, lenders are “using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case” and protect the senseless subsidies that the government currently gives them to originate loans:
The student loan industry, which would be forced out of the loan origination business if the proposal became law, is seeking to cast the administration’s plan as an ill-conceived government takeover that could put thousands of people out of work at private lending centers around the country at a time when unemployment is hovering around 10 percent…“We haven’t left any stone unturned — we’ll meet with anyone who will meet us,” [Sallie Mae CFO John] Remondi said in an interview. “We’re trying to identify at least 12 senators who would be helpful in this process.”
Sallie Mae alone spent more that $8 million lobbying last year, which was double its 2008 total. Political action committees for student lenders, meanwhile, made $2.1 million in campaign contributions. And if SAFRA ultimately fails to pass, the return on those investments could be huge, as SAFRA is expected to save taxpayers more than $80 billion over ten years.
Of course, the lenders are going all out to protect their federally guaranteed profits. But it’s really inexcusable to leave these subsidies in place with the current economic climate. Not only is student debt at an all-time high — with the average debt $23,200 per student – but given that long-term deficits need to be brought under control, it’s really senseless to continue giving student lenders subsidies to act as middlemen in the student loan process.
All of the senators who go to bat for the lenders are endorsing a measure that makes the deficit worse, but that doesn’t make the student loan process any better. One student loan company, Nelnet is “infamous for manipulating the federal government’s student loan subsidies to swindle American taxpayers out of $278 million,” but the company is still staunchly protected by SAFRA opponent Sen. Ben Nelson (D-NE), who recently has been griping about the administration’s budget not including enough spending cuts.
“We anticipated this,” Education Secretary Arne Duncan said of the lending industry’s lobbying efforts. “They’ve had this phenomenal deal that taxpayers have subsidized, and that’s a hard thing to give up.” But for the sake of the budget and students, the Senate needs to take that deal away.