Democrats, Under Pressure, Look to Cut Benefits From Student-Loan Bill

Congressional Democrats have begun private discussions on cutting down their $87-billion student-loan bill, largely accepting the political reality forced by new estimates of the legislation’s cost and savings.

The talks began in recent days, after a new analysis last week by the Congressional Budget Office showed that President Obama’s proposal to end the bank-based system of distributing federal student loans would save $67-billion over 10 years.

Democrats had hoped the savings would be much higher and would finance a major increase in the Pell Grant program for low-income students, as well as help for students needing low-interest loans, community colleges, minority-serving institutions, and other educational priorities.

The chairman of the House and Senate education committees, Rep. George E. Miller of California and Sen. Tom Harkin of Iowa, declined on Thursday to say what would be cut from the bill, which has passed the House but not the Senate.

"That’s a matter of discussion between Senator Harkin and myself and the leadership," Mr. Miller told The Chronicle. "I’m not going to answer the question because I’ve got to sit down with them."

The prospect of such cuts has been recognized by higher-education lobbyists as a steadily growing possibility for months, as Senate leaders refused to act on the bill out of concern that they could not overcome worries among fellow Democrats under pressure from loan-industry lobbying.

The bill would save the government money by ending the subsidies given to private lenders that distribute student-loan money, and would instead require all colleges to use the Education Department’s own direct-lending system.

The delay by the Senate, combined with many colleges’ decision to switch voluntarily into direct lending, has produced for Democrats an irony in which they will now reap a lower amount of taxpayer savings if the bill is enacted.

Reconciliation and Health-Care Reform
The bill has been further complicated by the months-long delays in Mr. Obama’s health-care bill. Senate Democrats have long known they have only enough support in the chamber to pass the student-loan measure by using a procedure known as reconciliation, in which a bill that reduces overall federal spending can be approved by a simple majority of 51 votes, rather than the 60 necessary to end a filibuster.

The White House and fellow Democrats writing the health-care bill have concluded more recently that they may need to use reconciliation to pass that legislation, too. And because reconciliation can be used only once each budget cycle, Democrats are faced with the proposition of whether the health bill and the student-loan bill can be combined into a single package.

Sen. Kent Conrad of North Dakota, as chairman of the Senate Budget Committee, is a key player on the strategy. Senator Conrad told The New York Times he believes the student-loan bill should be delayed for a few months, until Congress begins a new budget cycle by starting work on the federal budget for the 2011 fiscal year.

The Senate Democratic leader, Harry Reid of Nevada, has not yet given up on the idea of combining the health-care and the student-aid bills in a single reconciliation measure. "No, not yet," Mr. Reid’s spokesman, Jim Manley, told The Chronicle when asked if the student-aid bill would be excluded from reconciliation. And Senate Democrats told The Washington Post on Thursday that combining the bills in one reconciliation measure was increasingly likely.
And Senator Conrad seemed to ease his concerns about combining the bills late Thursday.

Citing a preliminary ruling by the Senate parliamentarian, which suggested that combining the bills could work, he told the Post, "I’d say yes, we’re leaning toward it."

Mr. Reid officially told Senate Republicans on Thursday that he planned to use the reconciliation procedure in order to pass the health-care bill. Mr. Manley said it was not decided whether the student-loan legislation would be part of that effort.

Democrats, though, do appear resigned to Senator Conrad’s assessment that they now must use the $67-billion estimate of savings under the student-loan bill, rather than an $87-billion estimate from last year, even though they can technically keep using the old figure until Congress passes a budget resolution for fiscal 2011.

The Top Priority for Higher Education
Mr. Conrad’s views touched off the negotiations involving Mr. Harkin and Mr. Miller over what they should remove from the bill to make up for the $20-billion drop in savings. Those negotiations do not appear to include anyone outside Congress, said Terry W. Hartle, senior vice president of the American Council on Education.

Mr. Hartle said he believed that Mr. Obama’s proposal to increase the maximum Pell Grant award each year, by an amount equal to the rate of inflation plus one percentage point, should be recognized by Democrats as the most essential element.

"It’s not that the other things are not good ideas," he said. "It is simply that the top priority within the higher-education community is the president’s Pell Grant proposal."

But Mr. Harkin may have signaled some loss of commitment to the president’s plan, telling reporters at a news briefing Thursday on Capitol Hill that he expected the student-aid bill would raise the maximum Pell Grant from $5,550 to the range of about $6,400.

A failure by Congress to pass any bill "is a catastrophe waiting to happen," Mr. Harkin said. It would mean 500,000 students would lose their Pell Grants, and others would have their awards cut by 60 percent, he said.

His job may have grown tougher this week with the release of a letter from six Senate Democrats urging their party’s leaders to "consider potential alternative legislative proposals" rather than the current student-loan bill.

At least some of the senators signing that letter and similar letters have said they had signed at the urging of Sallie Mae, the nation’s largest student-loan company, and would not necessarily vote against the final bill. Some of those senators have Sallie Mae operations in their states, and they have expressed concern about possible job losses.

"Sallie Mae has hired an army of lobbyists," Mr. Harkin said after the news briefing, "and they are going to the states in which they have employees and stirring up a lot of misinformation. But the facts are on our side, the savings are on our side."

A spokesman for Sallie Mae, Conwey Casillas, said Democrats could avoid any misinformation by taking even more time to hold hearings on the legislation. "We agree there is too much misinformation being spread," Mr. Casillas said, "including the false claim that lenders are pocketing billions in subsidies."


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