Lending industry fights overhaul of student loans
WASHINGTON - Last fall, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders.
President Obama called the idea a “no-brainer,’’ predicting it would take billions in dollars from the profits of private lenders and give them directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress.
But aggressive lobbying by the nation’s biggest student lenders has put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings, and petition drives to plead their case and stay in business.
Sallie Mae, a publicly traded company that is the nation’s biggest student lender, with $22 billion in loans originated last year, led the field in spending $8 million on lobbying in 2009, more than double the year before, and other lenders spent millions of dollars more, according to the Center for Responsive Politics.
Political action committees for the lenders and company employees made $2.1 million in political contributions last year, with the money split evenly among Democratic and Republican candidates, the data showed.
Some 10 million students got loans last year to help pay for their education, and there is disagreement about whether having the government take over virtually the entire lending program would help or hurt them. Private lenders warn that students may default on their loans more often because they will get less counseling; the Obama administration says students will benefit from more grants and expanded programs.
The student loan industry, which would be forced out of the loan-origination business if the proposal became law, is seeking to cast the administration’s plan as an ill-conceived government takeover that could put thousands of people out of work at private lending centers.
“We anticipated this,’’ Education Secretary Arne Duncan, said of the lending industry’s lobbying efforts. “They’ve had a sweet deal. They’ve had this phenomenal deal that taxpayers have subsidized, and that’s a hard thing to give up.’’
