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Student Loans Could Hitch a Ride With Health Bill

By Alyson Klein — March 08, 2010 1 min read

So it looks like Congress will attempt to push through health care overhaul by using the procedural mechanism known as “reconciliation,” which doesn’t require a 60-vote majority in the Senate and generally deals with taxes and deficit reduction.

Why does that matter for education? Well, if it happens, there’s a good chance an important student lending bill that could become part of the broader legislative package. And, as folks who are following this will remember, that student loan bill would provide some major new money for early-childhood education programs and community colleges (including dual enrollment and early-college high schools).

The bill, which is based on a proposal in the Obama administration’s fiscal year 2010 and 2011 budgets, would cause a seismic shift in the student lending world by scrapping the Federal Family Education Loan Program (which relies on subsidized lenders) and allowing all student loans to originate with the Direct Lending program (in which students borrow right from the U.S. Treasury). The change in the student lending program would free up savings, part of which could be used for the health care program, proponents say.

Legislation has yet to be introduced in the Senate. (Some folks actually think those in the Senate were holding off in case reconciliation became necessary for health care.) But the House passed a version of the student loan bill last fall that would also include money for school facilities as well as early-childhood education and community colleges.

The pluses to passing a loans bill this way? Easier for Democratic leaders to get the measure through—they might not have another chance for a while. And this wouldn’t be the first time that Congress has made major changes to the student loan program through reconciliation (check out this bill from 2005).

The minuses? Some Democrats in both chambers have concerns about the higher education bill (though mostly about the loans piece) and may be angry if it ends up being attached to health care. And Republicans, whose leaders say health care is being rushed through without enough bipartisan support, will likely be fired up even more if major student lending legislation is added to the mix.