There is an interesting article today in the Washington Post about the schism between Sallie Mae and other student loan companies on the loan giant’s alternative proposal for student loan reform. It includes a very strange quote from John Dean, special council to the Consumer Bankers Association President, comparing the proposal to “pornography.”

Campus Progress and other groups that fight for the interests of students are also opposed to the proposal, but we wanted to make sure that lawmakers and young people are adequately warned about the raunchy content that all of the warring loan company camps are putting out, as well as the President’s proposal. 

Sallie Mae’s Proposal – R

Sallie Mae’s proposal is self-serving, and it would prevent students from receiving billions of dollars that would otherwise go to Pell Grants.  (Some estimates, based on numbers from Sallie Mae itself, put that amount at around $17 billion.)  The proposal does contain a strong lesson, however: Sallie Mae acknowledges that the current system is broken, and that the industry is better served by creating (even flawed) alternatives to naysaying and fearmongering.

We strongly recommend that lawmakers only view the proposal with the guidance of advocates for students and college affordability or policy experts not associated with the student loan industry lobby.

Consumer Bankers Association’s (CBA) Opposition – NC-17

CBA has adopted what is perhaps the raunchiest position in the current student loan debate: do nothing. They have put forward no new ideas to reform the current system, or to fund an expansion of the Pell grant, despite several rather obvious facts:

• Reforming the federal student loan system will save taxpayers an estimated $94 Billion over ten years, which can be used for Pell grants. This will redirect funds to need-based grants, which low and middle income students will not have to pay back,
• The current system is broken – Congress was forced to intervene to keep it “on life support.”

The CBA has also been spreading misleading arguments to students and lawmakers. They claim, for example, that:

• The current proposal is not “student-centric,” when virtually every student group that works on college access and affordability issues has come out in favor of the President’s plan, including the US Students Association.
• The President’s proposal will increase the national debt. While technically true, this is more of an accounting trick. The government is currently on the hook for nearly every cent (97%) of each federal loan made by private companies that go into default, and, as previously mentioned, a the reforms will save taxpayers an estimated $94 billion over ten years. Hey CBA, rather than use my credit card, should I finance my purchases through loan sharks at 50% interest in order to improve my credit score?

CBA’s campaign against low and middle income students is not suitable for law makers, taxpayers, or young people, and anyone else not being paid by a student loan company.

President Obama’s Proposal – G

The President’s proposal is good for students and their families and good for the country because it expands college access and affordability, and takes a first step toward fulfilling the President’s commitment to ensure that “by 2020, America will once again have the highest proportion of college graduates in the world.”

With the recession making college less and less affordable, and the Lumnia Foundation predicting that our economy will face a shortage of sixteen million college educated workers by 2025, this long-overdue proposal is more pressing than ever.