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Democratic Leaders Want to Twin Student Loan Bill With Health Care

By Alyson Klein — March 11, 2010 2 min read
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Remember we told you that the student-loan bill might hitch a ride with the health-care bill through that wonky procedural mechanism known as budget reconciliation?

Well, it looks like the administration and the chairmen of both the House and Senate education committees officially want that happen. But it’s unclear whether the rest of Congress will go along with that plan or what the final loans package will look like, including whether some new education programs that would be created under the House version of the bill will be in the mix.

Some background: Last year, the Congressional Budget Office (Congress’ resident, non-partisan numbers crunchers) estimated that the administration’s proposed change to the student lending system would save $87 billion over ten years. The House passed legislation implementing the change. The bill would call for students to borrow right from the U.S. Treasury (through a program called Direct Lending) rather than relying on subsidized lenders to do the job (essentially scrapping the Federal Family Education Loan Program).

With the savings, House lawmakers would create a bunch of new programs, including grants to help states improve early childhood, bolster community colleges (including dual enrollment and early-college high school programs) and money for school facilities. Read all about it in this story.

And, in an important move for college access, the bill also sought to shift Pell Grants, which help low-income students pay for college, from the discretionary side of the ledger to the mandatory side, where it wouldn’t be subject to the whims of the appropriations process (becoming mandatory is the best thing that could happen to a federal program). It would also index them to the Consumer Price Index, plus 1 percent, to keep up with rapidly-rising college costs.

The complication: Now the $87 billion estimate has changed to $67 billion, in part because lots of schools have already switched to the Direct Lending program. Also, many more students are seeking Pell Grants because so many folks are looking to go back to school to bolster their skills during this economic downturn. (Demand for Pell Grants tends to go up when the economy goes south.) In fact, 20 percent more people applied over the past year than previously, a senior administration official told me.

Pell Shortfall: If the student loan change isn’t passed, there will be a major shortfall in the Pell Grant program, a senior administration official told me. In fact, the maximum grant would go to $2,150 from $5,300. If the bill doesn’t pass, Congress may have to make up for that deficit by cutting other programs. (Pell grants are funded out of the same pot of money as special education and Title I money for disadvantaged students.)

Another issue: Because of the major shortfall in Pell and the lower CBO estimate, it’s unclear just which, if any, of those other education programs will be part of the mix. The administration official I talked to said that’s still being worked out.

The pushback: It’s not clear the rest of the Congress will go along, especially some important moderates. In fact, six Senate moderates sent a letter to Sen. Harry Reid, D-Nev., the majority leader on the issue. They’re worried, among other things, about potential job losses in the student lending sector.

And many Republicans are generally wary about the changes to the student loan program. They see the change as a government takeover of what has been a private sector responsibility and have been skeptical of the savings estimate.

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