Student loan reform is change we can believe in

The student loan reform that Congress just approved as part of the budget reconciliation bill has been overshadowed by the health insurance reform process, but it's very good news for future college students. Senator Tom Harkin's office summarized some benefits in a March 18 press release, which I've posted after the jump. The most important change is that the government will stop subsidizing banks that currently make big profits on student lending. Instead, the federal government will expand its direct student loans, saving $61 billion over 10 years. Most of the savings will go to increase Pell grants.

Just a couple of months ago, student loan reform appeared endangered because of Republican obstruction and corporate-friendly Democrats who didn't want to cut student loan companies like Sallie Mae out of the equation. In early February, the New York Times reported on the extensive lobbying campaign against this bill. (One of the key lobbyists for the banks was Jamie Gorelick, a familiar name from Bill Clinton's administration.)

Scott Brown's victory in the Massachusetts Senate election made it even less likely that Democrats could round up 60 votes to overcome a filibuster of student loan reform.

Fortunately, Senator Tom Harkin and other strong supporters of this reform were able to get the measure included in the budget reconciliation bill that was primarily a vehicle for passing "fixes" to health insurance reform. Not only is student loan reform a good idea in itself, I agree with Jon Walker that adding it to the health reform improved the political prospects for getting the reconciliation bill through the Senate. Democrats from several states were said to be balking on the student loan reforms, but only three senators who caucus with Democrats were willing to vote no on yesterday's reconciliation bill.

This reform is scaled back somewhat from the original proposal, which would have saved $87 billion over 10 years and passed the House of Representatives last September on a mostly party-line vote. The original proposal would have provided larger increases in Pell grant funding, because it was budget neutral. In order to be included in the budget reconciliation measure (and therefore not subject to a Republican filibuster in the Senate), the student loan reform had to reduce the deficit. But that compromise was well worth making in order to move to direct lending by the government.

Regarding health insurance reform, financial regulation and many other issues, I'm one of those "cynics and naysayers" President Obama decried in yesterday's speech in Iowa City. But this student loan reform is a big step in the right direction, and the Democrats in the White House and Congress who kept pushing for it deserve credit.

There's more...

The Politics Of Reconciliation: Student Loan Reform Edition

On Friday, when I wrote about President Obama using reconciliation, I only talked about it in terms of healthcare reform but that actually isn't the only issue where the budget will provide for its use. The other is student loan reform, something that should have been low hanging fruit for the new administration. As Steve Benen explains:

This should be a no-brainer. The student-loan industry is getting government subsidies to provide a service the government can perform for less. Obama can remove the middle-man, streamline the process, save taxpayers a lot money, and help more young people get college degrees.

Why is Obama likely to need reconciliation to pass his student loan reform plan? Well, because the banks oppose it, of course, and if banks oppose something, so do Senators of both parties, particularly one obstinate Democrat. Sen. Ben Nelson of Nebraska, who usually claims to be a fiscal hawk, has been enabling this wasteful student loan bank giveaway program because so many of those banks that benefit from the system reside in Nebraska. Nothing like a local special interest to make you throw principle out the window.

But now, thanks to the budget deal reached by the administration and congressional leaders, Nelson is now irrelevant.

"They are gearing up for battle. So am I," Obama said yesterday at a White House event to tout his education plan. "They will fight for their special interests. I will fight for . . . American students and their families."

The procedural shortcut, known as reconciliation, would make it far easier to pass Obama's student loan plan -- which has drawn opposition from lawmakers in both parties -- as well as his proposal to expand health coverage for the uninsured. Reconciliation bills are tax or spending measures that cannot be blocked by filibuster, meaning the Senate needs only 51 votes to pass them instead of the usual 60. Democrats hold 58 Senate seats.

In both cases -- that of health care reform and student loan reform -- the administration is giving congress until October 15th to come up with legislation that can overcome a Senate filibuster.

There's more...

Diaries

Advertise Blogads