Last year, the House passed the the Student Aid and Fiscal Responsibility Act (SAFRA), which would end the senseless subsidies that the federal government gives to lenders to originate student loans. But thanks to intense lobbying by the lenders, blanket opposition from Republicans, and hesitant Democrats from states in which the lenders are based, the bill has stalled in the Senate.

To break the impasse, Democrats have been going back and forth on whether or not to include SAFRA in the same reconciliation package that they plan to use to make fixes to the Senate health care reform bill. Early yesterday, it seemed like such a step was not in the stars, but today, it’s looking more likely that SAFRA will indeed be included in the health care fix.

Budget Committee Chairman Kent Conrad (D-ND) has apparently had his concerns assuaged, while both Speaker of the House Nancy Pelosi (D-CA) and House Education and Labor Committee Chairman George Miller (D-CA) said that including SAFRA is a go. “This is critical to passing this in the caucus,” said Miller. “People have made it very clear they want to take this home.”

There are plenty of good reasons for putting SAFRA in the reconciliation bill. For starters, only one reconciliation bill can be passed per year, so leaving SAFRA out means exposing it to an almost inevitable filibuster later or waiting until next year’s budget resolution to include it again. Second, as Politico pointed out, the savings in SAFRA help the overall package meet reconciliation requirements:

The Senate parliamentarian notified Democratic leaders that, in order to meet the reconciliation requirements, both the Senate health and finance committees would need to produce $1 billion in deficit savings each over the next 10 years, Conrad said. With health care alone, the Health, Education, Labor and Pensions Committee would not be able to show the items within its jurisdiction save at least $1 billion. By inserting the education package, the committee would satisfy the reconciliation instructions, Conrad said.

With student debt at a record high of $23,200 per student, and the nation facing budget deficits for the next decade, it’s inexcusable to continue the current student loan system, which is nothing more than corporate welfare. The federal government gives billions every year to private companies to originate loans and then guarantees loan repayment up to 97 percent, even though the government can originate loans more efficiently and for less money. For every $100 lent by the banks, the cost to the government is about $13.81 in subsidies and defaults. The same amount lent directly by the government costs $3.85.

The lenders and their supporters in Congress argue that SAFRA constitutes an unprecedented “Washington takeover” of student lending and that the reform will kill jobs in the lending industry. As I pointed out over at AOL News today, both of these claims are bunk. The present system simply lets lenders pocket tax dollars while adding no value to the loan process.

http://wonkroom.thinkprogress.org/2010/03/12/pelosi-miller-loans/