Milton and Rose Friedman said it best: "We are told that the nation benefits by having more highly skilled and trained people, that investment in providing such skills is essential for economic growth, that more trained people raise the productivity of the rest of us.  These statements are correct.  But none is a valid reason for subsidizing higher education.  Each statement would be equally correct if made about physical capital (i.e., machines, factory buildings, etc.), yet hardly anyone would conclude that tax money should be used to subsidize the capital investment of General Motors or General Electric.  If higher education improves the economic productivity of individuals, they can capture that improvement through higher earnings, so they have a private incentive to get the training.  Adam Smith's invisible hand makes their private interest serve the social interest.  It is against the social interest to change their private interest by subsidizing schooling.  The extra students-those who will only go to college if it is subsidized-are precisely the ones who judge that the benefits they receive are less than the costs.  Otherwise they would be willing to pay the costs themselves." The following statement from the "News Scoop" is priceless: -This is not the time for colleges to eat away at historic financial aid gains by inordinately increasing tuition or decreasing their own financial aid budgets- Therein lies the rub doesn't it?  To quote a recent article by the economist Richard Vedder and Bryan O'Keefe: "By our calculations, the rise in tuition, adjusting for inflation, has grown by more than 100 percent over the past 25 years at private schools and nearly 83 percent at public schools" What makes you think that after 25 years of increases your pleading will make any difference?  The problem is one of incentive.  Colleges have little incentive with the taxpayer footing most of the bill to control the increases in the costs of their output.  If the end-consumer of the output footed more of the bill that would change.  Isn't it ironic that the recent public outcry with increases in tuition has been associated with the proliferation of private student loans?  The end-consumer directly paying free-market rates for services has a direct incentive to seek-out the most cost-effective producer of the desired output.  It follows that the producer than also has an incentive to keep costs down. Please don't fool anyone with your description of your auction program as "market-based".  There is nothing market-based about government subsidies and a government sponsered auction. A sad day for the taxpayer and consumer indeed. 

...Government foxes guarding the chicken coop - former loan industry officials shoveling money to their old employers. (Those foxes will surely be taken care of by their old employers when they leave government too). You know full well this story is about greed and taking advantage of students and families who are not experienced with a system operated by sharks. Free market, indeed. I'm sick of your tired framing of this as another case of government interference and tax waste.

It is about politics pure and simple.  More Pell Grants and cheaper interest rates at the expense of the "evil" lenders.  What a wonderful story.  Too bad the fundamental issues still remain.  The evil lender card has now been played (quite succesfully).  Moves to more paternalism are usually precipitated by this kind of attack-something I'm tired of.   Now what's next?  Cut more profit from lenders?  I don't think Americans are going to like the lack of innovation and service provided by the Direct Loan Program.  Government industry can't compete with private industry pure and simple in innovation or service.  They certainly won't like the increased taxes any elimination of private student loans would entail, and low and behold..... college prices are still rising as evidenced by today's news scoop:

Universities Increasingly Raising Fees, Rather than Tuition

A combination of stagnant state higher education funding and a reluctance to raise tuition rates has led many state colleges and public universities to increase the fees they charge their students, The New York Times reported Tuesday. These fees, which can be assessed on everything from student activities to computer service, rose by an average of 8 to 11 percent at public colleges in the 2005-2006 school year, outpacing growth in both the rate of inflation and tuition at these institutions. While individual fees may be as low as $10, they can often add up to hundreds or even thousands of dollars. College officials say these fees are necessary because states have not been providing sufficient funds and have been reluctant to raise tuition. But some state legislators have expressed outrage over the opaque nature of the fees, calling them a "backdoor tuition increase."

I'm sure more attacks are coming (Coumo's investigation of First Marblehead for example).  But you can't dodge the root causes of the cost issue forever.  Sadly, these roots aren't nourished by private industry. Americans are very dissatisfied with their congressional representatives for good reason (I believe I heard just the other day that the approval rating of Congress has reached an all-time low).  There isn't much substance coming out of Washington these days.  This bill is a prime example.  So, go on with your mud-slinging, "bankrupt analysis", and other attacks.

There is an axiom in the free market called the "law of diminishing marginal returns."  Crack open an economics textbook and see what it means.