March 22, 2010 in Nation/World

Legislation revamps college aid

Lawmakers pair changes with vote on health care overhaul

Jim Kuhnhenn Associated Press

WASHINGTON – Riding the coattails of a historic health care vote, the House on Sunday also passed a broad reorganization of college aid that affects millions of students and moves President Barack Obama closer to winning yet another of his top domestic policies.

The bill rewrites a four-decades-old student loan program, eliminating its reliance on private lenders and using the savings to direct $36 billion in new spending to Pell Grants for students in financial need.

In the biggest piece of education legislation since No Child Left Behind nine years ago, the bill would also provide more than $4 billion to historically black colleges and community colleges.

The bill was paired with the expedited health care bill, a marriage of convenience that helped the prospects of each measure. That combined measure passed 220-211.

“We are pairing this historic health reform with another opportunity that cannot be missed – the chance to make the single largest investment in college affordability ever at no cost to the taxpayers,” said Rep. George Miller, D-Calif.

The Senate will take up the bill next week under the same expedited rules used for health care legislation. That means the Senate can pass the education measure by a simple majority, virtually guaranteeing its success despite qualms from some Democrats and opposition from Republicans.

House lawmakers passed the bill last year, but in the Senate it did not have 60 votes to overcome a near certain filibuster. By riding shotgun on the fast-track health care bill, the legislation now can avoid that obstacle.

Still, Obama won’t get the Pell Grant expansion he initially sought. Congressional Democrats had to trim their original spending plans when the 10-year savings realized by switching to direct government loans dropped from $87 billion to $61 billion.

Private lenders have conducted an all-out lobbying effort against the bill, arguing it would cost thousands of jobs and unnecessarily put the program in the hands of the government.

America’s Student Loan Providers, a trade group representing lenders, called for the Senate to reject the measure. “This is not the final chapter,” the group said in a statement. “The Senate now has the historic opportunity to pass health reform – without eliminating thousands of jobs and critical student services.”

Under the college lending program, financial institutions provide college loans at low interest rates, and the government guarantees the loans in the event of default and subsidizes private lenders when necessary to keep rates low.

“By moving to the federal government’s direct loan program, we will put the best interests of students first and make college loans more reliable and affordable,” said Rep. Ruben Hinojosa, D-Texas, the chairman of a House higher education subcommittee.

In addition to using the $61 billion in savings from that change for Pell Grants and higher education institutions, the legislation would direct about $19 billion for deficit reduction and to offset expenses in the health care legislation.

Besides increasing Pell Grants, the bill provides $1.5 billion to make it easier for student borrowers to repay their loans. Beginning in 2014, borrowers would be allowed to devote no more than 10 percent of their monthly income to repay student loans. The current cap is 15 percent.

Still, the legislation is not as generous as the bill the House passed last year. The bill had anticipated far more spending on community colleges and had called for increasing the Pell Grants each year by the consumer price index plus 1 percent. Democrats had to scrap the additional 1 percent increase.

Instead, the bill proposes no increases in Pell Grants over the next two years and a modest increase over the five years that follow. The maximum Pell Grant, which a House-passed bill last year would have raised to $6,900 over 10 years, will now only increase to $5,900. The current maximum grant for the coming school year is $5,500.

ADVERTISEMENT Advertise Here

Seven comments on this story so far. Add yours!

Ninch on March 22 at 8:06 a.m.
My questions: Can the federal government now handle over 12 million more student loan? Who are these 5 or 6 “private contractors” that they already have lined up to administer these loans effective July 1 and how/what are they to be paid? How many more public employees will be hired?
Bottom line: Obama and his minions pulled their typical accounting trick of using “savings” to pay for new programs (education AND health insurance reform) but did not factor in the real cost of administering millions of student loans.
P.S. Taking away federally-guaranteed student loans from financial institutions will effectively cause job losses across the board with only the “private contractors” adding employees. Look closely and you will find Obama’s buddies profiting here.
Hint of government inefficiency: The Direct Loan website requires use of VERY OLD browser systems which effectively obstructs users of new technology, especially MAC/APPLE.
misjustice on March 22 at 8:37 a.m.
I’ll take the “accounting tricks” of President Obama to pay for health care and education over the “accounting tricks” of President Cheney to pay for his illegal invasion of Iraq (profits from the oil will pay for the war) and tax cuts to the top 2% (trickle down economics).
Yeah, President Obama; finally, after 8 years of President Cheney only caring about the haves and the have mores, we have a President that cares about the poor and middle classes!
And I won’t be cring in my pillow that the Banksters will be taken out of the equation in the student loan business; BofA has no business coming between me and federally guaranteed loans for education. Now, maybe I can afford Graduate School!!!!
Megan_B on March 22 at 11:03 a.m.
I use the direct loan website all of the time, and it doesn’t require me to use an old browser. I use the latest Firefox. And I have both private and Direct student loans, and I definitely prefer the interest rate, management, and flexibility of the Direct Loans over the others.
Ninch on March 22 at 1:32 p.m.
Maybe… Megan_B… you use Firefox on a PC and not a Mac. Or maybe the website was not operating correctly when I visited the site several times. Whatever if you read the “software and hardware” requirements you will immediately notice that the referenced technology is very old.
FYI. The interest rate and the “flexible” rules are the SAME for both federally guaranteed and Direct Loans. There is NO difference between the two, but there is a difference on interest depending on what date you took out the loan, NOT the origination of the loan.
And… misjustice… Be careful of getting your ideologies mixed up with the facts. BTW: The savings from eliminating banks is supposed to go toward Pell grants, which you are not eligible for as a graduate student.
Both of you need financial counseling and education.
Very sad that a couple of college students commenting here do not know how to Google or Bing to be able to verify/discuss authentic facts rather than make stuff up… AND seem to be lacking ability to read comprehensively.
Megan_B on March 23 at 10:24 a.m.
Sorry Ninch, I suppose I should have been more specific. My Direct Loans offer me an interest rate discount for automatic withdraw from my checking account that my other loans do not. Direct Loans also makes it easier to make payments in-between withdraws, is faster at sending forms during tax time, etc.
misjustice on March 27 at 12:35 p.m.
Dear Grinch Nich:
Taking the Banksters out of the equation will definately help Grad students…
Glad you’re so smart, too bad you are so mean!
Love,
MisJustice
misjustice on March 27 at 12:52 p.m.
Pell Grants are available to certain Grad students, such as those going into teaching programs.
Bet that just bums you out Grinch Nich! ; (
Face it, the country and the rest of us are moving on without mean people like you! And in time, old ideas will die out too!