Crocodile tears are streaming down K Street and up Capitol Hill from bankers crying about the student loan subsidy rates Congress is poised to cut.

But think tanks, the Congressional Budget Office and lawmakers such as Rep. Tom Petri (R-Wis.) say lenders' complaints are a diversion to keep Congress from truly cutting into the profits of the $85 billion student-lending industry.

The federal government guarantees banks, private lenders and Sallie Mae a profit on every student loan originated under the Federal Family Education Loan program. Lenders also are insulated from risk as taxpayers reimburse them when a borrower defaults...

The CBO determined that if Congress utilized "the most efficient" student-lending program available, which it found to be the direct-lending program, the government could save $10 billion over 10 years.

The New America Foundation, a watchdog group and think tank, estimated the savings would be closer to $15 billion to $20 billion.

But instead of proposing to kill the guaranteed-loan program, both the House and the Senate opted to overhaul it by cutting lender subsidies, decreasing interest rates, funding more Pell grants, and aiming to curb abuses in the system such as kickbacks and improper relationships between lenders and university officials...

Lenders spent $16 million lobbying Congress last year...

"I think they've done a really good job of confusing Members," said Stephen Burd, senior research fellow at the New America Foundation. "The way the [guaranteed] program works is so complicated, that it's easy to confuse people about the cost and benefits..."

For the complete article, please visit the Roll Call website.