In a recent Guest Observer in these pages, Sallie Mae CEO Jack Remondi wrote that the lender, which receives billions of dollars in taxpayer subsidies to make federal student loans, was in favor of President Barack Obama’s proposal to reform our student loan programs and claw back $87 billion from private lenders … almost.

Remondi wrote that Sallie Mae does want reform, but not the exact version the administration is proposing. Instead, he proposes “reform” that would allow the big banks — like Sallie Mae — to keep $8.5 billion of subsidies they have been enjoying for decades.

The U.S. Public Interest Research Group believes that money would be much better spent benefiting college students and their families.

A college degree is essential in today’s economy, but it is becoming harder to attain because of financial challenges. The combination of rising costs, stagnant grant aid, and shrinking state budget allocations to higher education has put higher education out of reach for millions of people.

More than 400,000 qualified high school graduates a year delay or forgo enrolling in college because of financial barriers. For students who make it to college, financial pressures can lead them to drop out or work more than 20 hours a week, which lowers their odds of completing a degree.

After graduation, the burden of student loan repayment often limits career options and the ability to save money or start a family. In 2008, two-thirds of all four-year college graduates borrowed, with an average debt of $23,186. And the number of college graduates with at least $40,000 in student loan debt has increased tenfold in the past decade.

Meanwhile, the unemployment rate for college graduates ages 20 to 24 in the third quarter of 2009 was 10.6 percent. And many recent graduates are having trouble paying their student loans. More than half the counties in the United States have double-digit student loan delinquency rates — some as high as 50 percent.

Students on campuses across the country are facing massive tuition increases and cuts to state-based financial aid. Their families, reeling from job loss and weak assets, aren’t able to help. Now is the time for Congress to invest in college affordability through Pell Grants and more manageable student loans.

In an unusual show of bipartisanship, the House passed the Student Aid and Fiscal Responsibility Act last September. The bill, which grew from the president’s proposal, would make historic investments to higher education, paid for by money currently subsidizing banks. Increased funding for grants will reduce the need to take out student loans and send a message about college affordability.

The Pell Grant is the nation’s largest aid program, providing need-based scholarship money to more than 7 million students of modest means. However, its value has eroded since the program’s inception. When the Pell Grant program was created in 1976, it covered 72 percent of the average cost of attending a public four-year college. In 2008, it covered only 32 percent.

The House bill strengthens Pell Grants by investing $40 billion over the next 10 years to annually increase the maximum grant award. To further curb high student borrowing and default rates, the bill uses $10 billion to keep interest rates on Stafford subsidized student loans low, capping interest at 6.8 percent with a variable rate that can go lower when market rates are lower.

To increase access to and completion of college, the House bill invests $9 billion in community colleges to enhance student instruction and bolster work force retraining programs. The remainder pays for strengthening the educational pipeline by setting standards for early childhood education, promoting best practices at the college level to help students complete their degrees, and rebuilding crumbling infrastructure on campus.

This country relies on our college-educated to strengthen its social and economic health. By overhauling our student loan program, we can use the savings to fulfill desperately needed college access goals, rather than maintaining a sweetheart deal for banks like Sallie Mae.

Christine Lindstrom is the higher education program director for the U.S. Public Interest Research Group.