The good news is that a long list of higher education associations wrote a letter to Congress endorsing the President’s plan to reform the federal student loan system by phasing out the Federal Family Education Loan program, and use the savings created by eliminating wasteful subsidies to banks to expand the Pell Grant, make it a mandatory program, and peg the maximum award level to inflation plus 1%.

This is great news, since higher education associations tend to carry quite a bit of weight around the Capitol. Surprisingly, the list included the National Association of Student Financial Aid Administrators (NASFAA), who have often been closely aligned (politically and otherwise) with the student loan industry. We are very happy that NASFAA and other associations representing colleges and the higher education professions are making their voice heard about these important policies.

The bad news is that Senate Budget Committee Chairman Kent Conrad (D-ND) appears wary of the plan. In a recent Congressional Quarterly article (no link available) he said, “in my state we have a state-owned bank. They make 60 percent of the student loans. Eighty percent of those are FFEL [Federal Family Education Loan] loans [sic].”

Sen. Conrad is in a powerful position, and seemed to say that he is taking the side of student loan companies (for-profit or otherwise) over the interests of students. I wonder whether it is political issues like home-state special interests, rather than procedural or philosophical problems with the budget reconciliation process, that is driving his reluctance to allow for real reform.