Sallie Mae's Influence Peddling
Anyone who thinks that getting legislation through Congress this fall that would eliminate the Federal Family Education Loan (FFEL) program is going to be a cakewalk needs to read this informative article from the Huffington Post. The piece provides the most comprehensive picture to date of how Sallie Mae has used the fortune it has amassed from making federally backed student loans to try to persuade Congressional Democrats to oppose President Obama's call for a full-scale conversion to the federal Direct Lending program.
For years, Sallie Mae had tilted its political contributions and lobbying efforts toward Republicans. According to a recent report published by the Center for Responsive Politics, "Since 1989, political action committees and employees affiliated with Sallie Mae have poured $6.3 million into the war chests of federal candidates and party committees." More than 60 percent of these contributions have gone to Republicans, with the largest recipients by far being Reps. John Boehner of Ohio and Howard P. (Buck) McKeon, both of whom led a key House committee in charge of student loan policy. Meanwhile, Sallie Mae also contributed $250,000 to President Bush's 2005 inaugural committee, the report states.
But as soon as Democrats won control of Congress in 2006, the company realized that it had to reverse course. As we've previously reported, Sallie Mae outlined its plans to "grow" a "pro-FFELP coalition within the Democratic party" in an internal strategy document it produced soon after the election. In the document, which was obtained by Rep. George Miller (D-CA) and published on Higher Ed Watch, the student loan giant said that it would target its campaign contributions to "Blue Dog and Financial Services Democrats," as well as members of the Congressional Black and Hispanic Caucuses.
Sallie Mae has lived up to its word. According to the Huffington Post, through its Political Action Committee (PAC) the loan company provided $145,000 during the 2008 election cycle to the individual campaign committees of Blue Dogs and Democratic members of the House Financial Services Committee. The corporation also provided an additional $10,000 to the Blue Dog Democrats' PAC.
In addition, at Higher Ed Watch, we have found that Sallie Mae's PAC donated $89,000 to members of the Congressional Black and Hispanic Caucuses during the 2008 election cycle, with two-thirds of the contributions going to members of the black caucus. We also found that Sallie Mae made total contributions of between $60,000 and $100,000 to the Congressional Black Caucus Foundation in 2006 and 2007 (see here [p.22] and here [p. 22]).
At the same time, according to the Huffington Post, the loan company has assembled a dream team of high-powered Democratic lobbyists to help it maintain its prominent position in the federal student loan program. The group is headed up by Tony Podesta, "a legendary Democratic fundraiser whose brother headed the Obama transition team," and Jamie Gorelick, the former deputy attorney general in the Clinton administration.
Also on the team are Paul Brathwaite, the former executive director of the Congressional Black Caucus; former top aides to Senators Barbara Boxer (CA), Byron Dorgan (ND), Richard Durbin (IL), and Charles Schumer (NY); as well as to House Speaker Nancy Pelosi, and Reps. Edward Markey (MA), David Scott (GA), and Tim Walz (MN).
So far, Sallie Mae has had little success in the House, where the Education and Labor Committee approved its version of the student loan reform bill in July. The legislation is expected to come up for a vote on the House floor in early September -- and despite defections from Blue Dog and Financial Services Democrats, it is expected to pass fairly easily. The real battleground is going to be in the Senate, which plans on taking up the student-loan reform legislation late next month. Already, at least a handful of Senate Democrats have expressed strong reservations, and in some cases outright opposition, to the President's proposal.
In recent weeks, Sallie Mae has expressed optimism about its prospects in promoting an alternative plan to Obama's, confidently telling financial aid administrators (as Tim Ranzetta of Student Lending Analytics recently pointed out) that "the legislative process is far from over."
At Higher Ed Watch, we would hope lawmakers who were recipients of Sallie Mae's largesse will not let the money and influence peddling cloud their better judgment. After all, Sallie Mae's lobbying prowess shows just what's wrong with the current system -- lenders collect taxpayer funded subsidies on government-backed loans with no financial risk and then recycle some of the earnings back to friends on Capitol Hill to keep the whole scheme going. It's high time to stop this vicious cycle that is wasting billions of taxpayer dollars each year.