Chapter 10Chapter 10 || Interest GroupsInterest Groups10
There are more than 20 million college students in America today. Many of these
students (or their parents) take on large student loans to fund their education. Until
recently, banks and other financial institutions provided the money for loans and
earned large fees as intermediaries. In 2010, President Obama proposed that the
federal government make the loans directly to students and their parents, which
would reduce borrowing costs and free up billions of dollars for Pell grants and other
programs benefiting college students.
At first glance, reducing the cost of student loans should be an easy sell—who
would oppose making college more affordable? The answer is the companies and
institutions that make money originating and managing these loans—financial
institutions such as Sallie Mae, Citibank, and others. If the government provided direct
loans, these financial institutions would lose a lucrative source of income. To stop
this legislation, these institutions spent millions of dollars on lobbyists to make their
case to the public and Congress, emphasizing that direct loans would put thousands
of their employees out of work (and reminding politicians that many of those who
work for the financial institutions live and vote in political swing states like Florida).
Opponents of the legislation, such as Senator Lamar Alexander (R-TN), lamented
that this would be an unnecessary “government takeover” of a privately run program.
Supporters pointed to the money that would be shifted from banks to students.“The Democratic majority decided, well look, while we’re at it, let’s have
another Washington takeover. Let’s take over the federal student loan
program.”
Senator Lamar Alexander (R-TN)“It probably won’t surprise you to learn that the big banks and financial
institutions hired an army of lobbyists to protect the status quo.... But I
didn’t stand with the banks and the financial industries in this fight.... We
stood with America’s students.”
President Barack ObamaThe debate over federal direct student
loans pitted well-funded banks and
other financial institutions against
millions of college students and their
parents. Did the banks’ ability to lobby
members of Congress and bureaucrats
translate into a policy victory?Interest Groups
Do interest groups serve
the needs of the many, or the
privileged few?
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