When the Congressional Budget Office recently projected
(PDF) that banks, not students, were in line to pocket $94 billion
worth of loan guarantees and subsidies over the next decade through the
Federal Family Education Loan Program (FFELP), it exposed one of
When the Congressional Budget Office recently projected (PDF) that banks, not students, were in line to pocket $94 billion worth of loan guarantees and subsidies over the next decade through the Federal Family Education Loan Program (FFELP), it exposed one of Capitol Hill's open-secrets. The financial sector giveaways in the name of student aid have grown so large that they now account for three-times more federal spending than student loans themselves.
During an interview on WJBC today, Sen. Dick Durbin, revived his criticism of FFELP and reiterated the need to do away with the program and reinvest the money in student aid, as is spelled out in President Obama's 2010 budget. Under the president's proposal, Pell Grants would be made permanent, the maximum awards would be raised by $200 next year, and future increases would be tied to the Consumer Price Index. Overall, an additional 10,165 Illinoisans -- and more than 260,000 students nationwide -- would be able to afford college. But those reforms would only be possible if Congress agrees to streamline FFELP into the existing Federal Direct Loan Program (FDLP), or "take out the middleman" as Durbin recently explained from the Senate floor.
In a sign of progress late last week, House and Senate Democrats struck a tentative budget agreement that moves the proposal forward. By approving the “reconciliation” voting process, allowing for a simple majority vote on the measure, Senate Democratic leaders effectively neutered the private student lending industry -- and the Republican and conservative Democratic lawmakers doing its bidding -- which was maneuvering hard to keep the subsidized loan program afloat.
During his on-air response this morning, Durbin criticized the banks for fighting to maintain the status quo. "They're making money off this," he said. "And to consider the mess were in in this country today because some of the banks and some of the investment firms went crazy with making money and the fact that we would step back now and bow and scrape and say 'I hope we don't get the banks angry with us now,' the heck with that." With reconciliation in place, it's almost assured Illinois students will be the ones benefitting.
Image used under a Creative Commons license by Flickr user william couch.