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Student Loan Reform to wed Health Care Reform in Reconciliation Ceremony

Health Care and Student Loan Programs Collide
By DAVID M. HERSZENHORN
Published: March 11, 2010


WASHINGTON — The chairmen of the Senate and House education committees said on Thursday that they would fight to attach President Obama’s proposed overhaul of student lending programs to the budget reconciliation package, which will include final revisions to the Democrats’ sweeping health care legislation.

But defenders of the private student loan industry in the Senate are intent on keeping the student loan initiative out of the health care legislation, and some Democrats are also worried that including the education measure could hinder efforts to pass the health care bill.

The White House, torn between two priorities — reshaping the financing of health care and overhauling student loan programs — has not said whether it wants them attached at the legislative hip.

The House in September approved a bill to carry out Mr. Obama’s plan to end subsidies to private, for-profit student lenders who make virtually risk-free loans using taxpayer money and then sell the loans back to the federal government. Instead, the government would broaden its existing direct-lending program, providing the same financing without generating private-sector profits.

At a news conference Thursday, the education committee chairmen, Senator Tom Harkin of Iowa and Representative George Miller of California, both Democrats, said they were pressing the White House and party leaders in Congress to include the education proposal in the expedited budget package.

“Families and students who rely on federal student aid need to know that Congress sides with them and not with the big banks,” Mr. Harkin said. “The federal government has been subsidizing these banks and wasting taxpayer money for far too long. It’s time to end it.”

Mr. Miller said, “In this case, we can do health and we can do education, and it’s critical that we do both.”

Mr. Harkin and Mr. Miller warned that if Congress did not move to enact the student loan proposal now, it could be derailed permanently as Congress headed further into the uncertainties of a high-stakes mid-term election year.

And they rejected an assertion that Congress could easily adopt the student loan proposal as part of next year’s budget, perhaps this summer.

“We have everything put together right now,” Mr. Harkin said. “Who knows whether or not we’ll be able to get a budget through this year?”

“If we don’t do this now, if we don’t kind of cross this Rubicon right now, and get rid of the subsidized bank loans and go to full direct lending, I don’t know when we’ll ever get to it,” Mr. Harkin added. “I don’t know when.”

Because the private banks have sufficient allies in the Senate, the bill could not win the 60 votes normally required to surmount a filibuster. A budget reconciliation measure can be approved by a simple majority and cannot be filibustered.

In the budget resolution adopted last spring, Congress included reconciliation instructions for both health care and education legislation, envisioning a need to adjust policies in both areas to meet deficit reduction targets.

The education bill passed by the House was projected to save $87 billion over 10 years, and the money would be redirected to expanding Pell grant scholarships for low-income students and other education initiatives.

But in recent months, the projected savings has dwindled as more colleges have switched to the direct lending program. The cost of expanding Pell grants has also increased as more people return to school and seek financial aid in the weakened economy.

Senator Kent Conrad, Democrat of North Dakota and chairman of the Budget Committee, said the education bill as passed by the House could no longer meet the budget reconciliation requirements and should not be packaged with the health care bill.

At the news conference, Mr. Miller and Mr. Harkin said the legislation could be adjusted to reduce spending and meet the requirements. Mr. Miller said Congress also had the authority to rely on the cost estimate for the House bill. Mr. Conrad has rejected that idea.

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

Obama administration officials said Thursday that if the student-aid legislation did not pass, and Pell grants had to be paid out of discretionary spending, there could be a large cut in the grants.

The officials said some eight million of the nation’s poorest college students would get a maximum of $2,150 — down from $5,350 this year. Under the proposed legislation, known as the Student Aid and Fiscal Responsibility Act, or Safra, the maximum Pell grants would have increased to $5,550, and then grown each year by inflation plus 1 percent.

Administration officials also said they understood that they would need to meet the requirement to help reduce the deficit, rather than increasing spending, and would work with the House and Senate to cut what was necessary, although no decisions had yet been made about precisely what would be eliminated.

At the news conference Thursday, Representative Xavier Becerra, Democrat of California and vice chairman of the House Democratic Caucus, said the country’s values were being tested. “The decision we will make will speak to the character of our nation,” he said.

NELNET needs to DIAF. I'm supposed to have a direct loan from the Dept of Education - My Uni completely dumped private student loans through banks - but I get a letter that Nelnet wormed their way in to service the loan.

Also, I completely forgot about this until I got an e-mail from Firedog about signing a petition for congress to the bill passed otherwise it will be killed. The e-mail also mentioned these student loan providers, Sallie Mae, JP Morgan, BofA, and Citigroup, as bringing the big lobbyists guns against the student loan reform act.
Tags: congress, debt, economics
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