Last year, the House passed the the Student Aid and Fiscal Responsibility Act (SAFRA), which would end the senseless subsidies that the federal government gives to lenders to originate student loans. But thanks to intense lobbying by the lenders, blanket opposition from Republicans, and hesitant Democrats from states in which the lenders are based, the bill has stalled in the Senate.

To break the impasse, Democrats have been going back and forth on whether or not to include SAFRA in the same reconciliation package that they plan to use to make fixes to the Senate health care reform bill. Early yesterday, it seemed like such a step was not in the stars, but today, it’s looking more likely that SAFRA will indeed be included in the health care fix.

Budget Committee Chairman Kent Conrad (D-ND) has apparently had his concerns assuaged, while both Speaker of the House Nancy Pelosi (D-CA) and House Education and Labor Committee Chairman George Miller (D-CA) said that including SAFRA is a go. “This is critical to passing this in the caucus,” said Miller. “People have made it very clear they want to take this home.”

There are plenty of good reasons for putting SAFRA in the reconciliation bill. For starters, only one reconciliation bill can be passed per year, so leaving SAFRA out means exposing it to an almost inevitable filibuster later or waiting until next year’s budget resolution to include it again. Second, as Politico pointed out, the savings in SAFRA help the overall package meet reconciliation requirements:

The Senate parliamentarian notified Democratic leaders that, in order to meet the reconciliation requirements, both the Senate health and finance committees would need to produce $1 billion in deficit savings each over the next 10 years, Conrad said. With health care alone, the Health, Education, Labor and Pensions Committee would not be able to show the items within its jurisdiction save at least $1 billion. By inserting the education package, the committee would satisfy the reconciliation instructions, Conrad said.

With student debt at a record high of $23,200 per student, and the nation facing budget deficits for the next decade, it’s inexcusable to continue the current student loan system, which is nothing more than corporate welfare. The federal government gives billions every year to private companies to originate loans and then guarantees loan repayment up to 97 percent, even though the government can originate loans more efficiently and for less money. For every $100 lent by the banks, the cost to the government is about $13.81 in subsidies and defaults. The same amount lent directly by the government costs $3.85.

The lenders and their supporters in Congress argue that SAFRA constitutes an unprecedented “Washington takeover” of student lending and that the reform will kill jobs in the lending industry. As I pointed out over at AOL News today, both of these claims are bunk. The present system simply lets lenders pocket tax dollars while adding no value to the loan process.

During the AHIP’s insurance conference on Tuesday, AHIP President and CEO Karen Ignagni claimed that health insurers were “very concerned about insurance premiums and the trajectory” of health care spending and promised that the industry remained committed to controlling costs. “We understand that begins also with us. So we are fully committed to cost containment,” Ignagni said.

But just several hours later, on Fox Business’ Neil Cavuto, Ignagni blamed hospitals, doctors, and the pharmaceutical industry for rising costs. Ignangni also falsely claimed that insurers cannot negotiate prices with providers:

IGNAGNI AT 10 AM: “So we are fully committed to cost containment, not finger pointing to other sectors.”

IGNAGNI AT 6PM: “Health care costs are surging. We have our health plans Neil, that are getting quotes from hospitals of up to, they want 40% increases, we see pharmaceutical prices surging. We see tests increasing, exploding…we’ve had consolidation of the hospital arena.”

Watch a compilation:

Ignagni’s hypocrisy exemplifies the industry’s two-pronged strategy of publicly supporting reform while secretly funding efforts to undermine it. Similarly, while the industry’s “charm campaign” has argued that insurers would “lead the charge” on supporting insurance reforms and controlling costs, insurers have continued rescinding policies and increase rates. In August, the Energy and Commerce Subcommittee on Oversight and Investigations investigated insurance practices and concluded that far from “leading the charge” on reform, Assurant Health, UnitedHealth Group, and WellPoint have “continued to rescinded policies for almost 20,000 individual insurance policyholders” and avoided paying more than $300 million in medical claims” over the last five years.

Ignagni isn’t entirely wrong in arguing that large provider groups use their market leverage to raise reimbursement rates and increase health care costs. But her claim that insurers can’t lower these rates through negotiation is wrong. In fact, at the insurers’ own conference, Mark Miller — executive director of the Medicare Payment Advisory Commission (MedPAC) — took insurers to task for overpaying hospitals and doctors and criticized the industry for failing to use their market power (in areas of high market concentration) to secure lower reimbursement rates.

– Cross-posted on the Wonk Room.

Last week, during our blogger meeting at the Treasury Department, senior officials said that they expected Treasury to implement some sort of program for reducing mortgage principal (the total amount owed) for underwater homeowners (who owe more than their house is currently worth), similar to what Chairman Sheila Bair is looking at over at the Federal Deposit Insurance Corp. Indeed, for months there have been whispers that Treasury may be cooking up some sort of plan along these lines.

However, following the meeting, Treasury quickly clarified to the Huffington Post’s Shahien Nasiripour that it “is not poised to roll out a major principal write-down program.” But if this report in today’s Washington Post is any indication, Treasury might want rethink that:

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale…And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete…The borrowers in trouble now are, for the most part, people who have better credit and safer loans and have become delinquent because they’ve lost their jobs or are dealing with other economic setbacks.

As I noted last month, instead of implementing a principal reduction program, Treasury has been hoping that mortgage servicers would voluntarily start cutting principals on their own. Treasury also released a plan last week providing both borrowers and servicers with a tiny financial incentive for moving ahead on short-sales (which involve allowing a homeowner to sell for less than they owe on their mortgage). But these are small tweaks at the margins of a crisis that is, by all accounts, only going to get bigger.

About one in four homeowners in the country is underwater, which amounts to 10.7 million households. And by June, 5.1 million borrowers are projected have home value’s that are below 75 percent of their outstanding mortgage balances, which research suggests is the point when “the owner starts to think hard about walking away, even if he or she has the money to keep paying.”

Plus, only about one-third of the borrowers who have successfully completed the trial version of the administration’s mortgage modification program have been offered permanently lower mortgage payments. This all confirms that the current foreclosure prevention programs simply weren’t designed to deal with a problem of this size and scope.

As Bair said in a speech last week, “we need to recognize the evolving nature of the mortgage problem. The initial phases of the crisis involved poorly structured mortgages that posed an affordability problem. Now we’re dealing with underwater mortgages…We see [principal reductions] as one possible way to encourage borrowers to stick with their mortgages. This could help reduce defaults, keep people in their homes, avoid costly foreclosures, and enhance the value of these loans.” Instead, we seem to be in a permanent state of twiddling at the edges of the foreclosure crisis.