The New York Times is reporting that six Democratic senators — Tom Carper, Blanche Lincoln, Ben Nelson, Bill Nelson, Mark Warner and Jim Webb — are working to blow up Obama’s top education reform: Ending the corporate profiteering on government loans for college students.
As I reported in Obama’s Real Reform, privatized government loans to students create a massive cash cow for notorious lenders like Sallie Mae and Nelnet:
The system essentially operates as a lucrative form of corporate welfare, offering a guaranteed rate of return for banks and other middlemen who provide capital for student loans. The government not only makes all the decisions — who is eligible for loans, for what amount and at what rate — but it protects private lenders from virtually any risk: When college students are unable to repay their debts, taxpayers are required by law to reimburse the banks for 97 percent of the losses. “The government is doing all the work and taking all the risk,” says Education Secretary Arne Duncan.
The lending reform — cutting out the private middleman and having the government administer its own loans — has never flirted with 60-vote support in the Senate. The plan has always been to pass this Sallie Mae slayer through reconciliation. But the Times is raising the specter that college loan reform could become “a casualty of the health care battle.”
With the margin for victory on health care so tenuous in the Senate, it appears the gang of six Democrats is seeking to Lieberman reforms that are undoubtedly in the best interests of college students and the federal budget:
Democrats in the Senate, where the private student lending industry has strong allies, predicted on Wednesday night that the education bill would not be part of an expedited budget measure containing the final revisions to the health care legislation. Some Democrats said that such a move would stall the student loan changes at a minimum for several months, and perhaps kill the overhaul altogether.
This isn’t an ideological battle. It’s a matter of common sense versus corporate greed. And right now too many Democratic senators are on the side of corporate greed:
As the president puts it: “It’s not a free market when we have a student-loan system that’s rigged to reward private lenders without any risk.” The real question, he says, is “whether we want to give tens of billions of tax dollars to special interests or whether we want to make college more affordable for 8.5 million more students.”
http://www.rollingstone.com/nationalaffairs/index.php/2010/03/11/2811/
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