If a simple reform to a federal education program could save the government $86.8 billion over the next 10 fiscal years, one would think it'd be easy to convince an economic conservative like Rep. Judy Biggert to champion the change. Not so.

Last week, the House Education and Labor Committee passed the Student Aid and Fiscal Responsibility Act, a bill to transform the $92-billion student loan market. As currently constructed, the government subsidizes the Federal Family Education Loan (FFEL) program to the tune of $55-billion a year. But the loans offered by private insurance companies are virtually identical to those the government dispenses through its the Direct Loan Program. And those companies -- including industry leader Sallie Mae and Wall Street titans like Bank of America, Citigroup, and JPMorgan -- turned what was once an altruistic program into a big business, charging interest rates and hefty late fees for unsecured loans while simultaneously pursuing stressed borrowers who themselves can't discharge the accumulated debt though bankruptcy.

As part of his budget, President Obama called on Congress to phase out these subsidies and instead redirect some of the resources into the government lending program. Any additional capital would be used to fully fund the Pell Grant program as well as create new programs to boost community college budgets, increase college completion rates, and improve early childhood education. When given the chance to vote on the measure last week in committee, Biggert joined 16 other Republicans (PDF) in turning it down. (Rep. Phil Hare voted in favor.)

What could have led the Hinsdale Republican to vote against the interest of needy students in her district? The influence of the banking industry, which is lobbying heavily on this issue and which Biggert is often susceptible, probably played a role. The financial servicers argue that the move limits a student's "choice of lenders." That seems unlikely -- Higher Ed Watch reminds us that the Education Department found that one lender made at least 80 percent of students' federal loans at 921 participating colleges. And students trying to overcome the crushing cost of college are most concerned about the cost of loans, which the government can offer more cheaply.

Rep. George Miller, chairman of the Education committee, tells Rueters that he hopes to bring the bill up for a full vote "probably right after the August break." We will keep our eye out for it.

At the state level, Rep. Mike Boland (D-East Moline) is taking his own steps to help students pay for school. At a round-table discussion at Elgin Community College yesterday, the House Higher Education Committee chair outlined a new bill he's proposing called the Illinois Challenge Scholarship:

A 'C' average plus a clean rap sheet plus a high school diploma could equal a free year at community college in Illinois. [...]

The Challenge Scholarship, he said, would require eighth-grade students and a parent or guardian to sign a pledge to maintain a 'C' average throughout high school and to avoid arrest or suspension from school for drugs, alcohol or violent behavior.

This seems like a great idea worth pursuing. But we shouldn't be so quick to bestow good will onto Boland. After all, he voted against (PDF) a temporary tax increase that resulted in the elimination of the entire Monetary Award Program for the spring 2010 term. That means 137,000 students across the state will lose grants after the first semester next year.

Image used under a Creative Commons license by Flickr user JanetandPhil.