Published Online: July 15, 2009

Student Loan Bill Savings Would Aid Early Learning

A shake-up of the federal student-loan program would be used to help finance a significant boost to early childhood education programs, under a bill introduced today by Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee.

Rep. Miller’s legislation—which is based largely on a proposal put forward by President Barack Obama in his fiscal year 2010 budget request—would scrap the Federal Family Education Loan Program, in which the government subsidizes private lenders to make federal loans. (“President’s Education Aims Aired,” Feb. 28, 2008.)

Instead, starting in July of next year, all loans would originate with the direct-lending program, in which students borrow right from the U.S. Treasury.

The change would save about $87 billion over 10 years, according to the nonpartisan Congressional Budget Office.

A portion of that savings, $10 billion over ten years, would be used to create a competitive-grant program to help states boost the quality of their early childhood programs, serving children from birth through age five, the bill says.

To qualify for the grants, states would have to rework their early learning standards, step up program review and monitoring, offer comprehensive professional development, and screen children’s health, mental health, and disability needs.

States would also have to work on improving support to parents and assessing children’s school readiness, under the Democratic bill.

The program would be administered by the U.S. Department of Education, in collaboration with the Department of Health and Human Services, which operates the Head Start program.

It’s not clear how many states would be eligible for the grants, since they would be issued on a competitive basis.

The new education programs created under the bill would be mandatory, meaning that they would not be subject to the whims of the annual appropriations process. Earlier this month, the House Appropriations subcommittee that deals with education spending rejected a $500 million early childhood education proposal in the administration’s fiscal 2010 budget request because it was too costly.

Good Investment Seen

On a conference call with reporters, U.S. Secretary of Education Arne Duncan pledged his “clear support” for Mr. Miller’s legislation.

“It’s better to invest money in education rather than subsidizing banks,” he said.

A huge chunk of the projected savings, about $40 billion, would be used to boost Pell Grants, which help low-income students pay for college. The bill would index Pell Grants to the Consumer Price Index, plus 1 percent, as Mr. Obama had suggested in his budget. The maximum Pell Grant award would rise from $5,550 in 2010 to $6,900 in 2019 under the bill.

But the measure would stop short of making the Pell Grant program mandatory, as Mr. Obama had proposed in his budget.

Mr. Duncan called the legislation “a good compromise.” He said, “This is absolutely the right outcome for students. This puts us on the path where we need to go.”

But Rep. John Kline of Minnesota, the top Republican on the House education committee, said the bill would shift the student-loan program away from the “flexibility of the private sector” and towards “a cold, federal bureaucracy.”

“Democrats have cloaked this proposal in the garb of fiscal responsibility, in truth it is little more than an entitlement spending spree taxpayers will be forced to reckon with for decades to come,” Mr. Kline said in a statement.

Barmak Nassirian, the associate executive director of the Washington-based American Association of Collegiate Registrars and Admissions Officers, said he is “very supportive and very pleased with the big picture.” Still, he said he wishes that the bill had shifted Pell Grants to the mandatory side of the ledger.

While the early childhood program and other new initiatives created under the bill are “worthy in their own right,” they should have “come second” to making Pell Grants an entitlement, he said.

Community College Boost

Another portion of the projected savings—$10 billion—would be used to pay for a major community college proposal that Mr. Obama introduced earlier this week.

That proposal would include additional resources to improve school facilities and online course offerings. It would dole out grants of at least $1 million each for community colleges to help retool remedial and adult education programs and improve dual enrollment offerings, such as early college high schools, among other activities.

President Obama has made community colleges a focal point of his economic-recovery strategy. Mr. Obama nominated a community college official to serve as the undersecretary of education, the No. 3 slot at the department. Martha J. Kanter, who until recently served as the chancellor of the Foothill-De Anza Community College District, in Los Altos Hills, Calif., a system that serves 44,000 students a year, was confirmed as undersecretary by the Senate last month. (“Obama Unveils Picks for Key Ed. Dept. Jobs,” April 8, 2009.)

The bill also includes $2.5 billion for a College Access and Completion Fund, to help improve college graduation rates, a high priority for the Obama administration. President Obama said in a speech to Congress earlier this year that he wants the United States to have the highest proportion of college graduates in the world by 2020. An additional $10 billion in savings expected under the legislation would be used to help reduce the federal budget deficit.

However, as the reaction from Rep. Kline indicates, the measure is sure to face significant opposition from some student lenders and members of Congress, who worry about expanding the federal government’s role in originating loans.

And, in reacting to the president’s initial proposal, some college officials have said it might be tough to switch to the direct-loan program in such a short time frame.

Still, the bill would preserve a role for the private sector. It would establish a competitive-bidding process that would permit the Education Department to choose lenders to service loans, based on the quality of their service to borrowers. And non-profit lenders would continue to service student loans.

Vol. 28, Issue 37

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