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Early Ed., Community College Initiative, Facilities Aid Out of Student Loan Bill

By Alyson Klein — March 18, 2010 2 min read
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Mixed news for some Obama administration and Democratic priorities on the student loan front.

It looks like student loans are indeed hitching a ride with the health care overhaul legislation. And Congress, indeed, is on the brink of requiring that all loans be originated through the Direct Loan program, in which students borrow right from the U.S. Treasury. This would effectively end the Federal Family Education Loan Program, which uses subsidized lenders. Subsidized lenders would compete to “service loans.”

The unfortunate news, from the perspective of some education advocates? It appears the Early-Learning Challenge Fund, which was intended to help states expand and bolster prekindergarten programs, didn’t make it into the bill. Neither did new money to help revamp community colleges, or dollars aimed at school facilities. The programs were in the version of the bill passed by the House of Representatives last fall.

The bill does include $2 billion to help improve education and training programs at community colleges. That’s different from the American Graduate Initiative, the new program to bolster community colleges that was in the original House legislation, but it is still some money for those schools.

By the time the bill made it to legislative prime time, there just wasn’t enough money left over to pay for those programs, in part because of the high demand for Pell Grants, and in part because so many schools had already switched to Direct Lending.

Rep. John Kline, R-Minn., the top GOP lawmaker on the House Education and Labor Committee, sent out a statement saying that the bill would “siphon” off $9 billion in college financial aid funding to help cover the cost of the “massively unpopular” health care overhaul package. The Republicans are worried that 100 percent Direct Lending would mean fewer loan choices for students.

UPDATE:A House Democratic aide just called to let me know that the roughly $9 billion Rep. Kline is referring to would be used for deficit reduction. And this aide said that savings from some health care programs would be used to help cover the cost of some of the new education spending in the bill, including a program aimed at helping students interested in working in the health care field and new money for community colleges.

In response to the statement, Rachel Racusen, a spokeswoman for Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, said, “This is interesting coming from the same Republicans who in 2005 used reconciliation to cut $12 billion in lender subsidies to give tax cuts to rich people, instead of help students.” She’s referring to this bill.

The bill has other implications for education spending: A huge projected shortfall in the Pell Grant program would be covered through this bill, using mandatory funds. That could be good news for fans of major K-12 programs (like Title I grants to districts and special education). Those programs are funded out of the same pot of money as the Pell Grant program. If this bill fails to pass, lawmakers may have to find the money to shore up Pell, and some lobbyists told me they were worried there wouldn’t have been much left over for some K-12 priorities.

It’s unclear whether lawmakers have a Plan B to pay for prekindergarten programs, community colleges, and facilities. Members of the House Appropriations Committee asked U.S. Secretary of Education Arne Duncan about it today. He told them pre-K is a high priority, but he didn’t propose a specific, alternate vehicle.

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