Student-Loan Bill Begins Showdown Week

The push for student-loan legislation, carrying the potential of billions of additional dollars for higher education, enters its showdown week with the expected release Monday of a new official cost estimate that may help determine its fate.

The legislation would end the bank-based system of distributing federal student loans and channel the savings into Pell Grants and other education programs. Democratic leaders in Congress, after months of waiting, are preparing to combine it with their equally long-awaited health-care legislation in a maneuver they hope will win enough votes to pass both measures by the end of this week or early next week.

The Congressional Budget Office is due to issue its formal estimate of the cost and savings of the combined package by Monday. Both supporters and opponents of the student-loan bill have said they expect the budget analysis will show that some of the savings from ending the bank-based lending system will end up helping the health-care bill meet its cost goals, though they disagree about the significance of that approach.

A Critical Diversion
Such arguments over the procedural aspects of combining the bills may be distracting voters from the bottom-line benefits of the total package, and may be hurting its overall prospects for passage, said Rep. Chris Van Hollen of Maryland, the assistant to the House speaker, Nancy Pelosi.

"People who try and start arguments about process on this are almost always against the actual policy substance, too, oftentimes for purely political reasons," Mr. Van Hollen said in a memorandum sent Friday to fellow House Democrats.

Democrats have anticipated for months that ending government subsidies for student-loan companies, and instead channeling all federally subsidized loans directly through the Education Department, would save taxpayers $87-billion over 10 years.

The money was to have been used to increase federal spending on Pell Grants, the main government subsidy for low-income students, and to help other higher-education interests, including students needing low-interest loans, community colleges, and minority-serving institutions.

The House of Representatives passed its version of the student-loan bill last fall. But after delays by the Senate, amid stepped-up lobbying against the bill by the loan companies, the Congressional Budget Office estimated 10 days ago that the measure would save only $67-billion.

Democrats responded last week by outlining reductions in the bill’s intended benefits, including trimming back the proposed increase in the Pell Grant, eliminating the money for community colleges, and cutting financing for school construction on the elementary and secondary level.

Attempt at a Winning Combination
Even more reductions may become necessary this week, after the Congressional Budget Office gives its latest evaluation of the combined health-care and student-loan bills. Democrats are merging the bills because Senate rules make it easier, using a process known as reconciliation, to pass legislation that is seen by the budget office as making an overall reduction in federal spending.

And that combination could mean that even more money would come out of the proposed levels of spending on Pell Grants and other education programs in the student-loan bill. That’s because the health-care bill was determined last week, through an evaluation of Senate ground rules, to be about $1-billion a year short of the total budgetary savings it needs to be considered revenue-neutral.

Student-loan companies, including Sallie Mae, are citing the finding as further evidence that Congress should stop trying to end their role in the distribution of federally subsidized student loans. Instead, they contend, Congress should abandon the House bill abolishing the bank-based program and pass a separate bill that merely reduces the amount of the federal subsidy paid to the loan companies.

Such an alternative bill, standing on its own, "may get enough votes" for passage, according to America’s Student Loan Providers, a coalition of lenders and other companies that benefit from the federal subsidies.

"The alternative proposal kills five birds with one stone," the group said in a statement: It "meets reconciliation instructions, funds Pell Grants, avoids job losses, continues vital borrower and school services, and may get enough votes."

‘No Second Chance’
Supporters of the effort to end the bank-based system counter by arguing that some use of savings from the student-loan bill to help the health-care bill is acceptable because the student-loan bill was always designed to return some money to the federal Treasury.

"It is clear that in this poisoned political climate," said Richard T. Williams, a higher-education lobbyist at the U.S. Public Interest Research Group, a consumer-advocacy organization, "there will be no second chance to pass the student-aid bill if it is not included" with the health-care bill in a single package.

On Sunday, lawmakers differed along party lines about the combined measure’s chances.
The House Democrat in charge of counting votes in his chamber, Rep. James E. Clyburn of South Carolina, conceded that he doesn’t yet see enough votes to pass the combined package. But Mr. Clyburn, who is the majority whip, also said on NBC’s Meet the Press program that he is "very confident that we’ll get this done."

The House Republican leader, Rep. John A. Boehner of Ohio, however, said that the health-care portion of the bill remains too unpopular. "They don’t have the votes," said Mr. Boehner, speaking on CNN.

THE CHRONICLE OF HIGHER EDUCATION

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