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Conrad: "I am strongly supportive of the education package...buuut Sallie wanks my campaign coffers"

March 10, 2010
Obama’s Student Loan Overhaul Endangered
By DAVID M. HERSZENHORN

WASHINGTON — With Democratic Congressional leaders and the White House struggling on Wednesday to finalize the details of major health care legislation, House Democrats were desperately trying to prevent another of President Obama’s top legislative priorities – a sweeping overhaul of student loan programs – from becoming a casualty of the health care battle.



But Democrats in the Senate, where the private student lending industry has strong allies, predicted on Wednesday night that the education bill would not be part of an expedited budget measure containing the final revisions to the health care legislation. Some Democrats said that such a move would stall the student loan changes at a minimum for several months, and perhaps kill the initiative altogether.

Mr. Obama’s plan would end a program in which the government pays private, for-profit student lending companies to make risk-free loans using taxpayer money. Instead, the government would expand its existing direct-lending program, saving billions of dollars that the president had proposed using to expand Pell grant scholarships for low-income students.

The House adopted a bill that included the president’s proposal in September, beating back an intense lobbying effort by the for-profit lenders. But given the industry’s allies in the Senate it was clear the bill could not win the needed 60 votes. Instead, legislative leaders had planned to use the budget reconciliation process to circumvent a filibuster and approve the education measure with a simple majority vote.

The White House and Democratic leaders are preparing to use the same budget reconciliation process to approve final revisions to the health care legislation. But in recent days some Senate Democrats, including Kent Conrad of North Dakota, who is the chairman of the Budget Committee, said they did not believe that the education bill could be included in the reconciliation bill.

A dispute over the fate of the education bill dominated a meeting among Congressional Democrats and White House officials on Tuesday evening, and after a similar meeting on Wednesday officials offered differing accounts of where the matter stood.

Senate Democrats said they believed the education bill would not be included a reconciliation proposal. House Democrats said no decision had been made.

Representative George Miller, Democrat of California and chairman of the Education and Labor Committee, who is the leading proponent of the student loan overhaul, said that the bill’s fate could be in jeopardy if it is not included in the reconciliation package. If it is left out, Mr. Miller said, “I would say it’s in a lot of difficulty.”

The education bill is popular in the House and some Democratic aides predicted it could help secure support for the health care bill.

But the education bill is angrily opposed by some Senate Democrats, particularly those in states where for-profit student lenders are major employers. Senator Ben Nelson, Democrat of Nebraska, for instance, said he was opposed to tying together the education and health care bills.

Provisions in a budget reconciliation bill must be directly aimed at meeting budget targets for reducing the federal deficit. Mr. Conrad said the education bill could no longer meet that requirement because the projected savings from ending the payments to private student lenders had decreased, according to a recent cost analysis by the Congressional Budget Office, while the cost of expanding Pell grants had grown. As a result, he said the bill as currently written would no longer reduce the deficit.

In a meeting on Tuesday, Mr. Miller and other House Democrats pressed Mr. Conrad to rely on an earlier cost analysis of the House bill that had been prepared by the budget office. Mr. Conrad refused, arguing that even if he could legally rely on the prior analysis, it was outdated.

In an interview, Mr. Conrad suggested that the best course of action would be for the education changes to be adopted through a reconciliation bill in next year’s budget process. Congress could approve a new budget resolution later this spring, and Mr. Conrad said the education bill could be adopted soon after that. But given the uncertainties of a mid-term election year, some supporters of the education bill predicted that it would simply die.



“I am strongly supportive of the education package,” Mr. Conrad said in an interview. “But I am also insisting that it be paid for.”

Private, for-profit student lenders, including Sallie Mae, have lobbied fiercely against the president’s plan. But they were unable to stop House Democrats from approving a bill. Critics of the industry say it reaps large, and unjustified profits, by originating loans made with taxpayer money. The industry insists that it provides valuable services to borrowers and competition for the direct government lending program.

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