And This Is The Bill With The Smooth Sailing

Barron YoungSmith (I'll admit to the name irking me) reports on President Obama's student loan reform, one of the most no-brainer bills of all time, but one which has been stymied for decades by business interests wanting to cash their corporate welfare checks:

Last month, taking cues from Obama, the House of Representatives passed the Student Aid and Fiscal Responsibility Act, which would alter the way the government funds Pell Grants and other student loans. Under the current system, the government gives banks huge subsidies to encourage them to lend to students. Effectively, this means the government is bribing banks to extend student loans by handing them money and letting them cream huge profits off the top. It is a vast waste of taxpayer money, since Uncle Sam could accomplish exactly the same thing by cutting out the middleman and lending directly to students [...]

The next hurdle is the Senate, where Tom Harkin's HELP Committee plans to introduce a student loan bill as soon as it's cleared some *ahem* backlog on health care reform. It looks as if Harkin's committee will introduce a bill that, like the House version, hews very closely to President Obama's proposals as well. And, since the bill is moving through the notorious budget reconciliation process instead of the normal legislative track--a decision made by Obama's allies who want to increase the likelihood of passage--it will pass through no other committees, save the quiescent Budget Committee, and it will not face the threat of a filibuster.

Game over? Not quite. In a testament to the sway that student lenders exercise over the Senate, it's not clear that Democrats have the 51 votes necessary to pass the bill in its current form. Ben Nelson, the staunch friend of lending companies, is against it--as are Blanche Lincoln, Mark Begich, Jeff Bingaman, and Tom Udall. And Senators Bob Casey, Arlen Specter, Bill Nelson, Mark Warner, Jim Webb, and Mary Landrieu are all said to be wavering because their states contain student loan companies. Many are searching for a way to keep lending companies involved in the process--an anguished Senator Casey even held a field congressional hearing in Philadephia this week, hoping to clarify his thoughts on the issue--and they'll be tempted to back some of the numerous pro-lender amendments that will be offered once the bill is open for floor debate. (Even in the House, Democrats couldn't prevent a mass revolt until they watered down the legislation by exempting existing state-based non-profit lenders from subsidy cuts.)

(Seriously, what the fuck, Tom Udall? I expect this from a lot of the others, but you?)

It's insane that there would be eleven lawmakers who call themselves Democrats opposed to something this obvious. It's a pure bank subsidy with no reason to exist whatsoever. There's no argument to be made other than "let's give the banks we bailed out even more free taxpayer money." And yet, I count eleven Senators up there wavering, despite the fact that this bill would create the largest benefit to students in history and cement Democratic gains among young people, while saving the government money. With college costs rising we're not even going to have a higher education system in this country, at least not one for anyone but the super-rich, if we don't accomplish this. Even this bill, which would expand Pell Grants with all the savings from no longer subsidizing banks to make student loans, would fall short of keeping pace with costs (although they would index an increase to inflation).

Really, if we can't do this, Congress might as well pack it in and go home for a couple years to do some soul-searching.

SAFRA Passes House

SAFRA, the student loan bill to end the privatization of loans already backed by the government, passed the House just now by a vote of 253-171. 6 Republicans (Buchanan, Cao, Johson (IL), Petri, Platts, Ros-Lehtinen) voted yes; 4 Democrats (Boyd, Herseth Sandlin, McMahon, Kanjorski) voted no. Considering that Stephanie Herseth-Sandlin is from the wholly owned banking state of South Dakota, that's impressive party unity, probably because it's indefensible not to be for this bill. As Gail Collins explains today:

It would simplify the federally guaranteed loan system, save an estimated $87 billion over 10 years and use that money to increase aid to low-income students, improve community colleges and raise standards for early childhood education.

Let us stop here and recall how the current loan system works:

1) Federal government provides private banks with capital.

2) Federal government pays private banks a subsidy to lend that capital to students.

3) Federal government guarantees said loans so the banks don't have any risk.

And now, the proposed reform:

1) The federal government makes the loans.

Wow. You really do wonder why nobody came up with this idea before.

Given all of the other profit centers that the banking industry has opened up, and the clear logic of the bill, maybe they figured they can't stop this one. If it runs into trouble in the Senate, it could easily move through reconciliation since the whole point of it is to end wasteful subsidies to the private lending market, which expand the deficit. I think there will be 50 votes for this, as Pell Grants are popular, the private loan market serves no purpose whatsoever, and another part of the bill offers challenge grants for early childhood education, another broadly popular priority.

So I believe we are going to see this change in higher education. And millions of college-age students, many of whom supported Barack Obama in record numbers, will recognize this almost immediately in higher Pell grants, cheaper loans and simpler forms. Savvy play, as well as a good policy.

At Least Education Reform Seems To Be Moving Swimmingly

There actually is one area of President Obama's agenda which could be plausibly described as a government takeover. That would be his plan to streamline the student loan market, eliminate the middlemen who provide no service, and allow students to borrow from the government directly, with the massive savings from that plowed into Pell Grants to help more kids go to college. If Obama were this swift with the middlemen in the insurance industry he'd be praised on the left as another FDR. As such, Sallie Mae and the others in the private student lending market, who get subsidies to do what the government can do on their own for much cheaper, don't have the power and influence to stop their own destruction.

Educational institutions currently have two ways to offer federal loans to students. In the Federal Family Education Loan (FFEL, pronounced "fell") program, the government pays subsidies to banks and lenders to dole out money to borrowers and reimburses companies up to 97% of the cost of any loan that is not paid back. The second way is the direct-loan program, created in 1993 as an alternate option, in which the government cuts out the middle man, lends money directly and gets all the profits. If the Student Aid and Fiscal Responsibility Act (SAFRA) passes both houses of Congress, the approximately 4,500 colleges and universities that are currently signed up for FFEL will have to abandon the program and start using the direct-loan option by July 1, 2010.

The House will likely pass the bill this week, and if it runs into trouble in the Senate, it could easily move through reconciliation since the whole point of it is to end wasteful subsidies to the private lending market, which expand the deficit. I think there will be 50 votes for this, as Pell Grants are popular, the private loan market serves no purpose whatsoever, and another part of the bill offers challenge grants for early childhood education, another broadly popular priority. We're going to see change - we can actually believe in! - in higher education. And the students who supported Barack Obama in record numbers will recognize this almost immediately. Savvy play.

Tool

Lindsey Graham is a tool.



That is all.

Actually, that's not quite all. Graham didn't know whether he would be allowed to clap for the university system while not being construed as clapping for the public option. So he half-stepped it.

And he's once again seated next to John McCain. When are those two going to move to Vermont or Massachusetts and make it official?

Cutting Off The Middleman

We're going to get student loan reform this year. It's basically a done deal. And as such it's not getting a lot of credit. But it's a significant, smart reform.

Right now, middlemen get subsidies from the Feds to lend to students, taking their cut from both the Feds and students in the process. There is no reason the government cannot lend directly to students, the PURPOSE of the student loan program, making the system more efficient and cutting down significantly on costs. The only people against this have personal stakes with student loan middlemen in their communities. But we should create jobs that create things rather than suck off profits from processes they don't need to be involved in. Yesterday a bill cleared a House committee that would end the unnecessary payments in the student loan market.

A bill that cleared a House committee Tuesday would largely remove private lenders from the federal student loan industry, generating an estimated $87 billion savings over 10 years to fund more government grants and loans.

The Student Aid and Fiscal Responsibility Act of 2009 would eliminate an entire category of student loans issued by private lenders and subsidized by the federal government, vastly expanding direct lending by the government starting next July. Democrats would use the savings to fund a $40 billion increase in federal Pell Grant scholarships over 10 years, $10 billion in community college upgrades and $8 billion in pre-kindergarten changes, among other uses.

Republicans opposed to the legislation say it amounts to a federal takeover of student lending.

Yes, indeed it is a federal takeover. One that would save $87 billion dollars.

We have several problems with the conservative takeover of the rhetorical side of government. One is that taxes are verboten. Another is that private industry always works better and cheaper than the federal government. That's not true, especially in this case, where the government pays lenders to do the lending they could do directly just to maintain the illusion of the private market.

Why I say that this will pass is that there's a budget reconciliation option on it. And unlike with a complicated health care reform bill, this is completely straightforward and falls entirely under the deficit reduction standards of the budget. So we'll get this, and it will be a step forward for America.

The Airbrush Of Human Beings From The California Budget Crisis

Peter Schrag is one of the few columnists left in this state who consistently makes sense, and today he attacks that silly NYTimes article about California, in particular the elements of conventional wisdom:

In his passing references to California’s serious issues, many of which have major implications for the nation as a whole, Leibovich collects pieces of the conventional wisdom, even when, as in his facile summary of the causes of gridlock in Sacramento, it’s wrong. Since Democrats have again and again agreed to multi-billion dollar cuts, it is not, as he thinks, just a matter of “’no more taxes’ (Republicans) and ‘no more cuts’ (Democrats).”

And while Jerry Brown, in his prior tenure as governor was indeed labeled “Governor Moonbeam” (by a Chicago columnist) for his space proposals, as Leibovich says, the label applied much more broadly to his inattention to the daily duties of his office and, most particularly to his dithering while the forces that produced Proposition 13 began to roll.

Brown later acknowledged that he didn’t have the attention span to focus on the property tax reforms that were then so urgently needed to avert the revolt of 1978. But to this day, almost no one has said much of Brown’s role in creating the anti-government climate and resentments that helped fuel the Proposition 13 drive.

It was the Brown, echoing much of the 1970s counter-culture, who, as much as anyone, was poor-mouthing the schools and universities as failing their students and who threatened to cut their funding if they didn’t shape up. It is Brown who spent most of his political career savaging politics and politicians, even as he ran for yet another office. Now this is the guy who wants to be governor again. But Leibovich doesn’t tell his readers that long history. Maybe he doesn’t know it.

The line about how those who fail to learn from history are doomed to repeat it can be inserted here. But Schrag hits on the most important failing of the article, and indeed of a good chunk of the political media here in California - they airbrush out the people who suffer for the failures of the politicians.

Where are California and the people who are feeling the pain – the school kids and teachers in hopelessly underfunded schools, the children who are losing their health care, the minimum-wage working mothers struggling to pay their child care, the students who are losing their university grants? Is all this really about nothing?

To far too many, the answer is yes. It's politics as theater, as a sporting event, where winners and losers are checked on a board, and whether or not a leader will keep their position is made the story rather than the principles he or she represents. And yet it's not Governor Hot Tubs and Stogies who will feel the pain of an economic downturn and massive budget cuts, nor well-heeled consultants or columnists who make up the scorecards. It's people.

People like the students in the Cal State system who may see their fees raised 20%, just months after a 10% hike approved in May. This will effectively block higher education for a non-trivial number of students, as will proposed enrollment reductions of 32,000 students.

People like LA County homeowners who have defaulted at twice the rate in May as they have in the previous month, as a foreclosure backlog builds up due to various moratoriums and an increase in repossessed homes entering the market.

People like IOU holders who may have to turn to check-cashing stores to get less-than-full value for their registered warrants after Friday, when most major banks (who have all been bailed out by the federal government, by the way) stop the exchange of the notes.

And people like the elderly, disabled and blind, who rely on the in-home support services that the Governor is trying to illegally cut in contravention of a contempt-of-court citation, at least in Fresno.

These are the great unmentioned in this California crisis, the people who Dan Walters tries to smear in his column today by turning every Democratic concern for the impacts of policy as a sellout to "public employee unions." Behind those unions are workers, and the people they serve need the help the provide, in many cases, simply to survive. But it would be too dangerous to Walters' beautiful mind to consider those faces, so he chooses to make political hay out of the violation of people.

This is the point of the People's Day of Reckoning Coalition. They refuse to have their existence denied any longer.

The Votes Aren't There For All Cuts

While Willie Brown reads tea leaves, actual votes are taking place in Sacramento. And the budget conference committee, in the end, rejected cuts to Cal Grants and Hastings College that the Governor requested.

California took a multimillion-dollar step backward Friday in cutting its budget.

Assembly and Senate members in a budget conference committee balked at derailing the Cal Grant program of college aid or stripping Hastings College of the Law of nearly all its state funding.

By rejecting the two proposals by Gov. Arnold Schwarzenegger, however, the committee created a new $235 million headache in its bid to fix a gaping fiscal hole.

The panel is rushing to balance the state's recession-wracked budget by curing a projected $24.3 billion shortfall.

Republicans actually claimed they were against eliminating Cal Grants but wanted to find additional offsets in the budget. But in the end, they voted to get rid of every aid grant for 77,000 low- and middle-income California students who want to attend an institution of higher learning. You would think that the Democrats could do something with that.

With respect to Hastings College, the budget committee averted what could have been a costly disaster.

Schwarzenegger's Hastings proposal would have eliminated about $10.3 million in state funding for the University of California law school, leaving it with only $7,000 in general fund support and $153,000 from lottery revenue.

Sen. Mark Leno, D-San Francisco, argued Friday that the cut was much deeper than those targeting other UC programs and would raise Hastings' annual tuition from $28,600 to about $36,600.

Leno said the cut could launch a costly court fight over terms of the law school's creation, which called for Judge S.C. Hastings to donate $100,000 to support the campus – and for the state to pay his heirs that sum, plus interest, if the state ever abandoned its financial support.

Leno said the governor is attempting to "privatize" the law school, and if the Hastings heirs sued, the state could wind up owing more from 130 years of accumulated interest than it could save from its budget-cutting proposal.

Seriously, did anyone in the Governor's office even think about the possibility of paying 130 YEARS' WORTH of accumulated interest on a $100,000 contribution in order to save $10 million, and how those numbers do not compute?

I think you can see where this goes. The conference committee is not nearly in the mood to accept the most extreme of the Governor's proposals - I don't think they'll tell those AIDS activists in the streets that they can no longer get their drugs, for example. And then we'll have a fairly large remaining gap after the committee's work is done. The first pot of money the budget committee will attack will be the absurdly large $4.5 billion reserve in the Governor's plan, essentially ignoring the will of the people not to institute a spending cap and socking away billions of dollars in the middle of a near-depression. After that, we're going to see a big fight. We need to continue to leverage grassroots pressure, wedge Republicans who are starting to waver on a cuts-only approach, and let Democrats know that they must hold the line on things like eliminating welfare and children's health care, and incorporate a majority-vote fee increase to make up the difference. We're already seeing cracks in the rush to shock doctrine California. Let's break it open.

Arnold, You're Like School In The Summertime - No Class

Apologies to Russell from Fat Albert, but in this case I mean that literally.

The Los Angeles Unified School District announced Thursday it is canceling the bulk of its summer school programs, the latest in a statewide wave of cutbacks expected to leave hundreds of thousands of students struggling for classes.

The reductions, which will force many parents to scramble for child care, are the most tangible effect of the multibillion-dollar state financial cuts to education. Community colleges also have announced summer program cancellations.

Bridge learning has a direct throughline to academic achievement, and in the long run, the value of getting an at-risk youth a high school diploma far outweighs short-term spending. But of course, summer-school programs extend beyond make-up classes for students behind the curve, but also playground and pool programs which keep kids out of trouble and off the streets. In other words, the very kind of after-school programs that the Governor championed before he took office.

Of course, this is in line with Arnold 3.0's Hooverist approach to education - cutting grants, raising fees.

Gov. Arnold Schwarzenegger's plan to dismantle the Cal Grant program would make California the first state in the recession-battered nation to eliminate student financial aid while raising college tuition, experts said this week.

"Other states are cutting back, but not a complete phase-out," said Haley Chitty, communications director for the National Assn. of Student Financial Aid Administrators.

The governor's proposal would end all new Cal Grants, eventually eliminating the state's main financial aid program for college students, and prevent existing awards from increasing. Grants awarded to 118,000 freshmen starting college in the fall would be canceled, as well as hikes in 82,255 continuing awards promised when the University of California and California State University raised fees this month by 10% and 9.3%, respectively.

Cal Grants awards focus on the lower-income population. That's on whom this budget is being balanced.

Arnold will deliver a joint address to the legislature this week. I'd rather that be a joint address to all public school students. Explain this to them.

The Sea Change In Higher Education

Quietly and with little fanfare, the President has embarked on a lasting, substantive benefit to Americans seeking college loans. And because he'll seek budget reconciliation for it and the measure clearly cuts costs, he'll get it, and finally we'll have a common-sense initiative that saves money, helps kids and ends the myth that privatization always benefits the country.

President Obama's health-care goals may be garnering attention, but his higher-education proposals are no less ambitious.

If adopted, they could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats concede is controversial.

At stake is a plan to expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security. Key to the effort is a consolidation of student lending that would give the U.S. Department of Education a near monopoly over the practice -- a proposal that has mobilized the private loan industry, which lent $55.3 billion to 6.4 million students in the 2007-2008 school year.

Obama outlined his initiatives, which also include incentives for colleges to cut costs and to raise graduation rates, in the fiscal 2010 budget that Congress approved Wednesday, and Democratic leaders said they hope to make them law by October.

The private loan industry takes federal grant money, delivers it to kids, and takes their profit share off the top. There is absolutely no reason for them to exist. With the savings from ending the privatization of the student loan industry, we can make Pell Grant funding permanent and help millions of Americans go to college. Without affordability, our efforts to bolster education in this country, in particular higher education, will never succeed. Furthermore, unsustainable student loan debt burdens young people coming out of college, lowers their purchasing power and forces their decision-making, furthering the debt peonage society.

The leeches in the private loan industry think they've created something:

"The only reason they're doing this is the government can make a lot of money," said Kevin Bruns, executive director of the trade group America's Student Loan Providers. "Private-sector lending built this entire industry, and now the federal government has piggybacked off of it."

Uh, no. Unaffordable higher education costs built the industry. They forced students to get loans or forego college. And middlemen benefited for no reason for decades. The taxpayer need not fund this industry any longer.

Obama is ushering in a sweeping change here, and practically nobody is talking about it.

No Money, No College

This sounds like a good way to entrench a permanent overclass:

In the bid for a fat envelope this year, it may help, more than usual, to have a fat wallet.

Facing fallen endowments and needier students, many colleges are looking more favorably on wealthier applicants as they make their admissions decisions this year.

Institutions that have pledged to admit students regardless of need are finding ways to increase the number of those who pay the full cost in ways that allow the colleges to maintain the claim of being need-blind — taking more students from the transfer or waiting lists, for instance, or admitting more foreign students who pay full tuition.

Private colleges that acknowledge taking financial status into account say they are even more aware of that factor this year.

“If you are a student of means or ability, or both, there has never been a better year,” said Robert A. Sevier, an enrollment consultant to colleges.

Let's face it - this has ALWAYS been a criteria. We've always seen a preference for legacies at the major universities and Ivy League colleges, with special treatment for those scions whose parents have, say, donated a building. But this is far more overt and applies to the entire college population. At a time when the federal government tries to increase Pell grants and smooth delivery of financial aid, your best chance of getting into colleges which have inflated their prices in recent years is to be very rich.

Nice. No wonder the US is one of the least class-mobile societies in the world.

The Looming Budget Fights

The Obama Administration budget has a number of elements that would restore fairness and progressivity to the tax code, end the creeping privatization of government functions, cut down on waste, fraud and abuse in contracting, and invest in some of the most important elements, notably education, health care and clean energy, that will drive our economic future. It is a telling quirk of the entrenched nature of Washington, however, that the most promising parts of this budget, the parts that do the most to shake up the status quo, are precisely the parts that will be fought so strenuously by those who wish to maintain that status quo.

For instance, there's the perfectly sensible alteration of the financial aid system for higher education, which would eliminate the middleman in the student loan market, reducing rates for college students while saving the government money through increasing efficiency and cutting subsidies to loan officers.

Among other changes, the Obama budget eliminates the Federal Family Education Loan Program, which excessively subsidizes banks, and moves to the U.S. Department of Education’s Direct Loan program. The Congressional Budget office projects this move to save $94 billion over nine years. The Obama budget then redirects the savings to students. The Congressional Budget Office estimates that in 2010-2011, $5 billion would be cut from subsidies to banks and lenders, and invested in students instead.

Redirecting the bank subsidies toward Pell grants would solidify the grant program as the premier source of assistance for low-income students. The Pell grant maximum would increase from $5,350 to $5,550; the estimated national average Pell grant award would increase by $121, from $3,299 to $3,423. Increasing the award will also enable an additional 130,000 more students to attend college per $100 increase in the maximum award.

However, because this system would take aim at the student loan industry that has built up in particular Democratic areas, top Democrats want to scuttle the deal.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) and House Appropriations Chairman David Obey (D-Wis.) are opposed to provisions in Obama’s budget plan that would remove private banks from the federal student loan program and transfer the expected savings — $94 billion over a decade, according to the CBO— to a new program that would instead guarantee Pell Grant funding for eligible students [...]

Conrad is under some pressure from his home state to preserve a role for banks in the federally backed student loan program.

“If the president’s proposal goes through, that will deeply affect the Bank of North Dakota,” according to Julie Kubisiak, the director of student loans at the state-owned bank. She said the bank’s entire advisory board, consisting of the governor, attorney general and other officials, have written to the state’s Congressional delegation opposing the change.

That's ALL this is about. There's some lip-flap about not wanting to create a new entitlement by guaranteeing Pell Grant funding, but it's B.S. The banks want to keep their subsidies. I mean, it's not like they've created any hardship for the country lately, is it?

Then there's the battle over ending subsidies to the oil industry:

The Obama administration's push to raise taxes on the oil industry is reigniting a battle the industry fought and won last year.

Under pressure to narrow projected deficits, President Barack Obama's 2010 budget proposal calls for raising more than $31 billion over the next decade by eliminating the oil and gas industry's eligibility for various tax breaks.

The plan would slap companies with a new excise tax on production in the Gulf of Mexico worth $5.3 billion between 2010 and 2019, and repeal the industry's eligibility for a manufacturing tax credit worth $13.3 billion in that period. The industry says the final cost of Mr. Obama's proposals on petroleum production could top $400 billion, once his plan to put a price on greenhouse-gas emissions is factored in [...]

The oil industry, which in its campaign donations has long favored Republicans, is taking its case to voters. A new ad campaign by the American Petroleum Institute in about a dozen states says new taxes would "hobble our ailing economy" and "cost thousands of American jobs."

"I think we should pay our fair share of taxes, but I don't think we should look at this industry as the source of all money to pay for the renewable energy industry," said Peter Robertson, vice chairman of Chevron Corp. Mr. Robertson said Mr. Obama's tax proposals will discourage domestic oil and natural-gas production and undermine his goal of reducing U.S. dependence on foreign oil.

I know that President Obama vowed to fight the special interest he takes on in his budget. And It's good to see the grassroots advocacy groups rallying behind this, particularly against conservative Democrats who want to hide their views from their constituents. But the power is very entrenched. So this will be a very big struggle.

Dream Stealer

The Governor of California vetoed SB1, legislation which would have allowed students who are children of undocumented immigrants to apply for financial aid and have the same opportunity at contributing to the American dream as their counterparts. These are young men and women who did not make the decision to come to this country, yet represent out best hope to continue as a strong nation by contributing to our economy and our historic diversity. They consider themselves Americans and Californians and wish to use their talents and skills to benefit this country and this state. The Governor said no.

And get this, he blamed it on the high cost of college (yeah, who's responsible for THAT?).

At a time when segments of California public higher education, the Universirt of California and the California State University, are raising fees on all students attending college in order to maintain the quality of education provided, it would not be prudent to place additional strain on the General Fund to accord the new benefit of providing state subsidized financial aid to students without lawful immigration status.

That expense will pay itself back 10 times over in the future. But now the dream of a college education for these students becomes ever more remote. This used to be a different kind of country.