Even as colleges are being forced to raise tuition costs to prohibitive levels, governors and educators everywhere cite the need to get more students through college, to raise graduation rates, to improve students’ competitive edge and to lure new businesses to their states. Given those conditions, an effort to expand federal student loans by $80 billion over the next 10 years simply by eliminating wasteful, private-industry middle-man costs would seem to be a no-brainer. Why not let students and their parents arrange their loans directly with the lending source?
Indeed, direct-source lending is a nobrainer, except for one thing: For-profit lenders are trying desperately to save their $80 billion gravy-train in no-risk, government-guaranteed profits over the 10-year period. They are fighting vehemently through their lobbyists in Congress to kill legislation that would eliminate their middle-man role in a loan system they never should have been given in the first place.
The cost-savings, to be sure, is a legitimate figure. It comes from an indepth study by the Congressional Budget Office, the non-partisan scorekeeper on financial issues for Congress.
The battle that’s shaping up amounts to another classic epic in the unending struggle to clip the silk-stocking recipients of corporate welfare. As might be expected, the lobbying campaign is being led by banks and Sallie Mae, which was originally created as a governmentsponsored entity and later privatized in 2004 as a for-profit corporation.
Sallie Mae, listed on Wall Street as the SLM Corp., generated $22 billion in risk-free (i.e., government guaranteed) student loans last year. It poured $8 million into the industry lobbying campaign in 2009 to kill the bill to revise the loan system, which was passed by the House last year and now awaits action by timid senators. Other lenders have chipped additional millions into the lobbying campaign. Energized by recent election returns in favor of Republicans, their traditional supporters, lending-industry lobbyists have been button-holing senators to argue that their student-loan