The New York Times reports today that the student loan industry has been working tirelessly over the past year to stall, delay, and potentially kill a plan that would take bank subsidies and put them in to Pell grants and direct loans. The legislation, called the Student Aid and Fiscal Responsibility Act, is the brainchild of the Obama administration and seems to be only garnering opposition among lenders who stand to lose expensive government subsidies.
Sallie Mae, the industry's heavyweight, has spent $8 million on lobbying in 2009 to block the legislation. The Times piece also noticed that student loan industry employees and political action committees (PACs) had also spent millions on campaign donations -- about $2.1 million industry-wide. Sallie Mae alone spent $194,000.
Although it's defeating to hear that the industry is so strongly opposing legislation will genuinely help students be able to better afford college, there is some good news. The administration seems determined to see SAFRA passed. It's already passed in the House, and the Senate seems to be waiting on what happens to health care reform to make a move on student aid. Like students have been doing for the past several months, they will simply have to wait and see what the Senate will do.
Last night, Jon Stewart chatted about student loan reform with Austan Goolsbee, an economist and member of the Council of Economic Advisers. The college affordability action starts at 4:38, check it out:
Yesterday, President Obama answered a few of the 11,000 questions submitted on YouTube as part of its State of the Union Q&A. The first question on education (around 17:00) was about college affordability, and Obama again expressed his support for legislation that would cut subsidies to student loan companies, and invest the savings into Pell grants and other education initiatives. Check it out:
To put that in perspective, Sallie Mae spent a total of $4,097,500 million in 2009 to oppose bills like the Student Aid and Fiscal Responsibility Act (SAFRA), which would save $87 billion over 10 years and use the savings to help students pay for college, improve college completion rates, invest in community colleges and minority serving schools.
ProtectStudentChoice.org, a campaign bankrolled by private lenders opposing President Barack Obama’s college affordability legislation, is taking its message to billboards in Colorado, and probably in other places too.
As Campus Progress reported last month, the campaign has hired Washington D.C.-based public relations firm Qorvis Communications to stage a faux grassroots campaign against the Student Aid and Fiscal Responsibility Act (SAFRA), a bill in Congress that would move most federally-guaranteed student loans to the existing Direct Lending Program.
While Qorvis operatives admit that the National Council of Higher Education Loan Programs (NCHELP)—an interest group of approximately 160 lenders and collection agencies—is funding the campaign, there’s no denying that lending giant Sallie Mae is also intimately connected to the effort.
SAFRA would end the taxpayer subsidized Federal Family Education Loan (FFEL) program, which allows private lenders like Sallie Mae and Nelnet to make large profits on federally-guaranteed loans, even though it is taxpayers, and not banks, who bear the main risk on those loans. By saving money through the elimination of wasteful subsidies to the private middle man, the bill would save $87 billion over 10 years and use the savings to help students pay for college, improve college completion rates, invest in community colleges and minority serving schools, and support early learning programs for young children.
But that doesn't matter to ProtectStudentChoice, which continues to claim that SAFRA would somehow eliminate jobs. Sources in Colorado contacted Campus Progress to complain about the billboards, which feature what seems to be a mother and child, under the deceptive headline “My job is on the line.” But as colleague Pedro de la Torre points out in The Nation, such claims are dubious at best, if not complete bunk.
The billboards, located on bustling Colfax Ave. in Denver, encourage residents to contact their Senators. SAFRA has already been approved in the House of Representatives, and the bill is currently awaiting action in the Senate.
The status quo for student lending has led to a host of abuses, exposed by New York Attorney General Andrew Cuomo and others, where lenders sometimes compete not through maximizing service but through providing Caribbean trips and other gifts to school financial aid staff. There was never a choice for students, or a fair process, to begin with.
In fact, NCHELP member CollegeInvest was found to have short-changed students with its scholarships, according results of a Colorado state audit last September:
The Early Achievers Scholarship Trust Fund should have been disbursing 5% of fund's value in scholarships or3.8 million in scholarships. The fund actually disbursed only91,000 to 76 students, or 0.1%.
CollegeInvest has spent almost10 in administrative costs for every1 that has been disbursed in scholarships.
The Trust fund investments averaged -4.8% annually which was below its peers at -1.3%.
The Service and Opportunity Scholarship failed to give out 330 out of 565 Service Scholarships and Opportunity Scholarships (58% of available scholarships not given out).
CollegeInvest failed to give out 860,000 of 1.8 million available in scholarship funds under the Service/Opportunity Scholarship.
The findings only demonstrate that the status quo ProtectStudentChoice is working so hard to maintain is, in reality, failing students.
White House press secretary Dana Perino says goodbye to reporters during her final appearance in the press briefing room at the White House in Washington, Friday, Jan. 16, 2009. (AP Photo/J. Scott Applewhite)
A familiar face has joined the battle over student financial aid reform: former George W. Bush press secretary and Fox News contributor Dana Perino has fired her first shots, opposing President Obama’s plan to make college more affordable for students. Unfortunately, her contribution to this debate suffers from the same kind of distortions she was known to offer from the White House podium.
At issue is the Student Aid and Fiscal Responsibility Act (SAFRA), a bill in Congress that would move most federally-guaranteed student loans to the existing Direct Lending Program. This would end the taxpayer subsidized Federal Family Education Loan (FFEL) program, which allows private lenders like Sallie Mae and Nelnet to make large profits on federally-guaranteed loans, even though it is taxpayers, and not banks, who bear the main risk on those loans. By saving money through the elimination of wasteful subsidies to the private middle man, the bill would save $87 billion over 10 years and use the savings to help students pay for college, improve college completion rates, invest in community colleges and minority serving schools, and support early learning programs for young children.
While writing words that clearly mimic Sallie Mae talking points against the bill, Fox News columnist Perino spreads fear of a supposed “public option for student loans” that would “eliminate all choice” in the market. But such claims are contrary to facts. For one thing, the federal government already is in this business: The loan money involved is subsidized and backed by Uncle Sam.
On top of that, under the FFEL program championed by Perino, it’s the colleges, not the students, that choose lenders, a fact that SAFRA opponents openly admitted when they said that students “are sort of stuck with what the schools decide.” And this competition for business has led to a host of abuses, exposed by New York Attorney General Andrew Cuomo and others, where lenders sometimes compete not through maximizing service but through providing Caribbean trips and other gifts to school financial aid staff. There was never a choice, or a fair process, to begin with.
SAFRA would simply allow the government to have ownership and oversight over federal student loans, rather than wasting billions on the FFEL program and tolerating the ensuing corruption and inefficiency. If the legislation becomes law, private lenders can still earn revenues servicing loans, even if they don’t own them, and lenders will have to compete for these contracts by providing quality service.
Perino’s sudden interest in opposing college affordability is of note because Burson-Marsteller, the public relations firm she joined in April, reported being the only PR agency to work on a “5 billion sale of Sallie Mae to a coalition of private investors” in 2007. There are also recent reports that Perino will be starting her own firm soon. Are Burson-Marsteller or Perino currently paid to advise Sallie Mae? Could the article be an attempt to lure new business? Nothing’s certain yet, but when opponents talk of “eliminating choice and competition in the student loan industry” and Perino writes almost the exact same thing verbatim, that SAFRA would “eliminate all choice and competition in the student lending market,” it’s a convenient coincidence to say the least.
As a college student, much like millions of other students across the country, I used to go through the annual dreaded task of filling out my FAFSA in order to apply for student loans and grants. Like those students, I found it would take hours to complete as I compiled a variety of information both about me and my parents. For some, the old FAFSA was simply too much. About 1.5 million students eligible for aid do not apply every single year. Thankfully, the whole process just got a little simpler.
The new FAFSA features “skip logic” allowing students to automatically skip questions that aren’t relevant to them. For example, lower income students will no longer be asked for asset information as that has no impact on their aid eligibility. Beyond this, a design overhaul features a color-coded tab system for the different sections such as the student or parent sections. Additionally, widespread introduction of hints and help options allows students to get more information if they need it. Another change is the ability to get an instant estimate of their Pell Grant and loan eligibility.
Beginning in just a few weeks, students applying for aid for the 2010-2011 academic year will be able to retrieve and import their tax data directly from the IRS. This will further simplify the process and allow much of it to be completed automatically.
However, the Obama Administration believes that while this is a substantial improvement, more needs to be done. They have asked Congress to remove all remaining asset questions and other financial information that cannot be found on a family’s tax return. This would make it possible to apply for aid in only a few minutes simply using IRS tax returns.
These changes are helpful to all students seeking to attend college. However, while making the application more accessible is a priority, it’s also important to ensure that the aid provided is sufficient to meet students’ needs and to match the rising cost of college. Right now, Congress is considering ending wasteful subsidies to banks that would cost us $87 Billion over the next decade. Instead supporters of this approach, including President Obama, propose to re-direct that money into new aid and support for students. Make sure you tell Congress you support this change by visiting Students Over Banks.
Where’s the love for Sallie Mae, America’s leading student loan provider? Apparently it’s not on Twitter, where hatred is strong for the lending giant. Here are just a few tweets from today, and these are some of the milder ones.
Disclamer: We certainly don’t endorse all these remarks by distressed loan recipients. But collectively, they tend to undercut Sallie Mae’s arguments that only private lenders can guarantee quality lending experiences.
More info on loans, and reform that would put students over banks:
One student at American University, Anthony Gilmartin, set up a Facebook donation page to attempt to get donations for his roommate, Will Xpres Maye. The page, called "My roommate Will needs $16,000 for college!"is just another indicator that college is becoming increasingly unaffordable. Maye, a sophomore at American University, says he came up more than $8,000 short for this semester.
While Maye didn't disclose his full financial situation, his roommate's fundraising tactic is likely to address something that is commonly referred to as unmet need. That's the difference between the full amount of federal aid (in both grants and loans) a given student qualifies for, and the actual cost of attending the university. Often, many students have no other choice than to take out private loans with few borrower protections and high interest rates, or resort to long hours working side jobs to make up the difference. Incidentally, the Chronicle of Higher Education reported in May that students at community colleges are far more likely to have proportionally higher amounts of unmet need than their counterparts at either public or private four-year institutions.
Maye could be a student that would benefit from reforms in the proposed Student Aid and Fiscal Responsibility Act. The legislation would cut lender subsidies in favor of increasing the Pell grant and switching to more cost-effective direct lending. The bill has already passed the House, but awaits introduction in the Senate.
Gilmartin's method of raising money for his roommate is certainly creative, but Maye is far from alone in massive amounts of student debt. Gilmartin's page doesn't address the multitudes of other students facing challenges paying for college. Not everyone has a roommate like Gilmartin to advocate for him or her on Facebook. The fundraising page on Facebook leaves few clues why Maye is more deserving than other students. The stunt may or may not work for him, but for other students, their only hope may be increased investment in federal student aid.
Today, a diverse coalition of 49 groups representing millions of Americans submitted the following letter to the Senate HELP Committee expressing its support for the Student Aid and Fiscal Responsibility Act. The House passed the bill in late September, and it is expected that HELP Committee Chairman Sen. Tom Harkin will introduce his version of the bill in the coming weeks. The coalition was convened by Campus Progress, the United States Public Interest Research Group (USPIRG), the United States Student Association (USSA), and the Campaign for College Affordability.
The cooperation of these organizations, which include student groups, women’s groups, parent groups, African Americans, Latinos, college admissions officers and registrars, social workers and others, sends the clear message that this legislation is critical for the advancement of educational opportunity in America, and will finally prioritize the needs of students over those of banks and special interests.
Campus Progress Advocacy Senior Associate Pedro de la Torre III, released the following statement today in response to the passage of the Student Aid and Fiscal Responsibility Act (H.R. 3221) today in the House:
“Campus Progress applauds the passage of the Student Aid and Fiscal Responsibility Act. This bill, the largest federal investment in higher education in our history, provides critical and carefully-targeted aid to young people. By prioritizing the needs of students over wasteful subsidies for loan companies, the bill will enable millions to pursue higher education.
Today, Campus Progress and other student advocacy organizations joined with Speaker of the House Nancy Pelosi and Rep. George Miller (D-CA), Chairman of the House Committee on Education and Labor, to highlight the student debt crisis and rally support for the Student Aid and Fiscal Responsibility Act (HR 3221), an unprecedented student aid bill that would boost grant aid by $40 billion. The House is expected to vote on the legislation this week. Read More »
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