Lobbyists Are in High Gear as Final Outline of Student-Loan Bill Takes Shape

Congressional Democrats, amid negotiations overshadowed by the nation’s prolonged health-care debate, appear to have reached agreement on student-loan legislation championed by President Obama that would pump billions of dollars into higher-education programs.

Education Secretary Arne Duncan and the chairmen of the two education committees in Congress, Sen. Tom Harkin of Iowa and Rep. George Miller of California, have made plans to publicly outline the agreement on Thursday, aides said Wednesday.

Their announcement would cap one final week in which college lobbying groups that support the measure have been urging their members to phone wavering lawmakers, and loan companies opposed to the bill have kept reminding the lawmakers of alternatives that the companies contend would save jobs and preserve competition in the system.

Democrats have been working for the past year to pass the measure, which would end the bank-based system of distributing federally subsidized student loans and channel the savings into Pell Grants and other education priorities.

The House of Representatives passed its version of the bill last September, but the initiative has been held up in the Senate by the recognition that it could win approval only under special rules for "budget reconciliation" measures. Under that process, a measure that reduces total federal spending can pass the Senate with a simple majority of 51 votes rather than the 60 votes needed to end a filibuster.

Rounding Up Votes
And because the reconciliation process can be used only once in this year’s budget cycle, Democrats have been holding back the student-loan bill while they finish work on the health-care bill, in case both measures need the reconciliation process and must therefore be merged into one bill. This week became a showdown week for the health-care bill and thus the expected combined "reconciliation" package containing both bills, after President Obama postponed his departure for a trip to Asia from Thursday until Sunday, so he could help round up enough votes.

Although the primary attention of Congress during the week has been on the health-care measure, lawmakers responsible for education policy have been working simultaneously to make final changes to the student-loan bill. The changes have been necessary to reflect updated estimates of the bill’s savings and costs, as well to help lock down support for the combined package of health-care and student-loan legislation.

Throughout the week, college associations have been lobbying lawmakers to keep key benefits in the bill. Their efforts have focused mostly on ensuring that savings are directed to the Pell Grant, the main federal-aid program for low-income college students.

"We’ve all been spending a great deal of time doing that," said Cynthia A. Littlefield, director of federal relations at the Association of Jesuit Colleges and Universities.

Other priorities, Ms. Littlefield said, include preserving additional money for the Perkins Loans program, which provides low-interest loans to needy students.

The American Association of Community Colleges has been seeking money for the American Graduation Initiative, a portion of the bill that would help those two-year colleges expand, said David S. Baime, the group’s vice president for government relations.

The Congressional Budget Office reported last year that ending the bank-based system of distributing subsidized loans, and giving the loan money directly to colleges and their students, would save the government $87-billion over 10 years. But the budget office this month revised that figure to $67-billion, leaving Democrats scrambling to cut the bill’s expected beneficiaries.

Efforts to Preserve Programs
Mr. Baime said he wasn’t accepting reports in the past week that the money for community colleges would be among the necessary cutbacks. "There are people still who care about the program and our colleges, and are fighting for it," he said.

Congressional aides had said they expected the final version of the combined health-care and student-loan package to be ready by this past Monday morning, in time for House members to review its language and vote before Mr. Obama’s scheduled departure for Asia, with the expectation that the Senate would follow immediately afterward.

But aides said late Wednesday that after three additional days of negotiations with undecided lawmakers, the complete bill has finally been drafted and will be released publicly on Thursday. The final overnight delay was attributed in part to the desire of some lawmakers to attend a St. Patrick’s Day gathering on Wednesday evening at the White House.

The debate over the wisdom of ending the bank-based system of student lending, and over that proposal’s effects, continued beyond Capitol Hill. A survey this week by Student Lending Analytics, which advises colleges on their student-loan options, found that only 2 percent of institutions are still waiting for Congress to act before making preparations to use the Education Department’s direct-lending system.

The bank-based system has been more popular with colleges than the direct-lending alternative, in part because the loan companies have used their government subsidies to provide the colleges with additional services and benefits. Some loan companies have warned that continued delays in passing the bill could leave some students without their full loan options for the 2010-11 academic year.

Another Lender Withdraws
But other lenders, whose ability to issue student loans has been diminished by economic conditions over the past couple of years, have withdrawn from the federal system. Chase announced Tuesday that it would stop offering federally subsidized student loans as of April 17, citing the refusal of Congress to extend a program of additional federal subsidies that it created in May 2008.

Those still interested in providing federally subsidized loans, including industry leader Sallie Mae, have warned that the bill would cost thousands of banking-industry jobs. They’ve challenged the Congressional Budget Office’s projection of savings from ending the bank-based system and have asked Congress to consider an alternative that would let them continue to write student loans at a lower rate of subsidy.

A Democrat-leaning group, however, issued an analysis on Wednesday that suggested the real savings could be even greater than the Congressional Budget Office’s estimate. The group, the Center for American Progress, said it concluded that expanding Pell Grants as proposed by the student-loan bill would inject as much as $126-billion into the U.S. economy, when considering the career contributions of students who would be helped by the additional federal aid.

And a new report by D. Andrew Austin, an economic policy analyst with the nonpartisan Congressional Research Service, concludes that Congress, if it refuses now to end the bank-based system of distributing federally subsidized student loan money, may have to keep rescuing it in the future.

The bank-based system "is obviously not the most efficient way of helping students and their families finance college attendance," Mr. Austin wrote in the spring edition of Education Finance and Policy, the journal of the American Education Finance Association. "On the other hand, financing provided by the patchwork of federal and local education agencies that involves private and public actors, perhaps typical of the American system of governance, may prove more flexible and resilient than more centralized approaches."

THE CHRONICLE OF HIGHER EDUCATION

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