It should be, as the President once called it, a "no-brainer": Overhaul our broken system for distributing federal student loans. Stop giving banks undeserved profits for administering these loans (an estimated $80 billion over ten years), since they take no risk and have managed the program poorly. Make sure our money goes directly to the young people that need them the most. Who could be against that? In fact, the student loan reform bill has already passed the House.
Yet, in an ugly replay of the lobbyist feeding frenzy that accompanied health reform, this initiative is being undermined in the Senate by highly paid K Street bank operatives. This is a test case: If Washington can't overcome lobbyist influence enough to do the right thing for our country's young people, it will be a public spectacle. Any politician who fails to fight for this program will be hurting themselves politically and punishing college students financially, leaving those students in the hands of rapacious and corrupt lenders.
It's a simple, multiple-choice test for Washington politicians: Do you choose a) fight for the banks, or b), fight for students and their families? Your answer will be graded on Election Day.
It's not like the banks have distinguished themselves in administering these loans. Consider this: After an investigation in New York, "six schools agreed to return payments they had received for steering students to lenders." As the New York Times observed in 2007, "a senior official at the Department of Education who helped oversee the federal student loan program held shares of the parent company of the student loan company Student Loan Xpress." Adds the Times, "Financial aid officers are offered gifts and trips, and universities are offered hundreds of thousands of dollars in payments, if they place a company on their list of preferred lenders ..."
We'll be better this time, lenders assure us. In a recent Times story, bank officials and lobbyists argued that after reform passes students will receive less "counseling," described as one-on-one sessions in "high school gyms." But according to conversations I've had with students, these sessions have been more like sales pitches. (I wonder if a bank "counselor" has ever advised a student to revise her or his plans and attend a state school where loans might not be necessary.)
Although the Times dutifully reports these and other claims from the bank lobby, its editorial board rightly describes them as "scare tactics and distortions."
This misleading and heavy-handed lobbying effort is being led by Sallie Mae, which is the country's biggest provider of student loans. Sallie Mae should be the poster child for everything that's wrong with simplistic notions of "privatization." It was created in 1972 as a government-sponsored enterprise and began privatizing in the late 1990s. How is that working out for us? It spent $8 million on lobbying last year.
Like other lenders, Sallie Mae's big on influence peddling. As the Times reports, "Political action committees for the lenders and company employees made $2.1 million in political contributions last year, with the money split evenly among Democrat and Republican candidates ... Sallie Mae's PAC alone made $194,000 in donations." And, "Sallie Mae and other lenders have staged a series of town-hall-style meetings at their job centers around the country."
So a corporation created by the government, that earns its billions through guaranteed government loans, was turned into a so-called "private enterprise" without any of the risks usually associated with that term. Now it's using our money to influence our leaders to act against our interests -- while at the same time running tea-party-like scare sessions. Sallie Mae became a zero-risk, get-rich-quick venture for its executives. Then it turned rogue, leading the effort to shortchange the very students it was designed to serve.
That $80 billion in bank profits could be redirected to do great things. Under the House bill it will provide more in direct loans and encourage students to enter public service in return for debt forgiveness. It will also help establish $10,000 tax credits for families that have gone into debt to help their kids get ahead.
Or, if Sallie Mae and friends have their way, maybe it will be used to pay more billions in banker bonuses.
In a replay of health care lobbying tactics, bankers also claim this is a "government takeover." (Call it Death Panel II.) But there's no "takeover." Loans would be administered directly by schools, not "faceless bureaucrats." Lobbyists have also been threatening Senators from states that employ call center workers servicing these loans. But call center workers will be needed for direct Federal loans, too.
A grassroots movement could help turn the tide. You can click here to tell your Senator to support student health reform. And it's not just the Senate. The President's credibility is on the line, too. When he announced the program last fall he promoted it in the strongest possible terms, including the "no-brainer" comment. The nation watched as health reform was shredded by lobbyists as if it were a fat cow tossed into a pool of raging piranha. Will this Presidential initiative be next?
Politicians bailed out Wall Street. If they fail to bail out the country's college students and their families, the picture won't be a pretty one. Words won't be enough; the public expects action. Elected officials need to prove they're not in Wall Street's pockets, and that they'll stand up for regular people. Washington needs to demonstrate that it can be as effective in fighting for student loan reform as it was in fighting for the bailout.
After all, if a student's dreams of a better life aren't "too big to fail," nothing is.
Richard Eskow is a consultant and writer, and works with the Campaign for America's Future. He blogs at:
Website: Eskow and Associates
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