Congress is inching closer to slashing overly generous subsidies the government provides student loan banks and increasing need-based student aid by a concomitant amount. Last week, the House approved a budget reconciliation bill that would reduce bank subsidies by $19-billion over five years and redirect the savings to expanded grant aid for financially-needy students and lower interest rates for undergraduate student loan borrowers. Today, the focus shifts to the United States Senate, which began debate yesterday on its own version of the bill to cut lender subsidies by $18.3-billion.
The loan industry, which failed in its efforts to influence the debate in the House, is making a full-court press to gut the Senate bill by trying to persuade conservative Democrats to buck party leaders and reject the legislation.
The first shot across the bow is a bipartisan amendment to the Senate bill that would reduce the subsidy cut that for-profit lenders like Sallie Mae and Nelnet would endure. The amendment, which is expected to be introduced today and is co-sponsored by Sens. Richard Burr (R-NC) and Ben Nelson (D-NE), would reduce by several billion dollars the amount of money that the Senate bill would devote to students receiving the maximum Pell Grant. The neediest students would lose out on an average of $300 in increased scholarship aid.
The student-loan industry is pushing the Nelson-Burr amendment hard. Corporate bigwig-turned-blogger Michael Dunlap, who moonlights as the Chairman and CEO of Nelnet, has already voiced his approval of the measure. Dunlap writes in a post on his blog titled "Extravagant Education":
"Fortunately, there are people who understand the reality and implications of this situation. Senators Richard Burr (R-N.C.) and Ben Nelson (D-Neb.) have proposed an alternative that will preserve choice and competition, and I highly recommend everyone support it."
According to campaign finance research conducted by Higher Ed Watch, there is more to the "reality and implications" than Dunlap references. For instance, since Senator Nelson's failed attempt to unseat Sen. Chuck Hagel (R-NE) in 1996, he has received $165,650 from lenders and related individuals and trade groups. By far the largest contributors have been Nelnet and Union Bank, both of which are headquatered in Lincoln, Nebraska and owned by the Dunlap family. All told, Nelson has received $70,150 since 1996 from Nelnet's political action committee (PAC), Nelnet executives, and officials with Union Bank. Of this amount, $64,900 came in the 2005-2006 election cycle alone, when the Senator was up for reelection.
Other generous contributors to Nelson include Citibank ($17,500 from its PAC since the 1999-00 cycle) and Wells Fargo ($15,000 from its PAC since then). The donations were especially pronounced in the lead-in to Nelsons re-election last November, for which he received over $100,000 from lenders, individuals or associated trade groups, including Nelnet and Union Bank.
Burr has received donations totaling nearly $130,000 from private lenders for his personal campaign account and his Leadership PAC, the Next Century Fund. The most generous giver has been Wachovia Bank, which since the 2001-02 election cycle has provided $26,850 in donations through its PAC. This does not include an additional $17,500 given by the companys North Carolina chapter from 1995 to 2002.
The giving especially picked up since Burr moved to the Senate. He received $24,250 in the 2003-04 cycle and $41,500 in the 2005-06 cycle for a total of $65,750 as a Senator slightly more than what he received from loan companies and interest groups from 1995 to 2004 as a Representative.. Sallie Mae, Wachovia, and Bank of America have all ratcheted up the donations since Burr switched chambers.
As the Senate prepares to vote on an amendment that would redirect a large chunk of government subsidies from low-income students to for-profit student loan giants like Sallie Mae and Nelnet (an "Extravagant Giveaway" in our opinion), we felt it was important spotlight these donations.
We're not saying that Burr and Nelson are bought and paid for. We're just pointing out the "realities and implications of this situation" in the words of our favorite new blogger.