Combining the bills gave Democratic lawmakers a way to bypass a threatened filibuster of the bill by Senate Republicans. The combined bill used a legislative procedure called reconciliation that's reserved for budgetary measures, which, under the Senate rules, allows legislation to be passed with a simple majority. The strategy helped get the bill passed, but it required cutting back on some of the financial aid provisions in the student loan bill, to meet complex reconciliation rules. For example, today's New York Times says the student loan bill had originally proposed a new $10 billion program to increase community college enrollments for improving skills in the American workforce. But those funds were among the spending excised to keep the entire package on target. Instead, section 1501 of the final bill authorizes $2.5 billion for job-training grant programs over the next 5 years.
The original bill's main provisions remain intact, however. The federal government will now loan money either directly to students or through educational institutions. The law ends the role of private banks in originating student loans. While private companies can still play a role in servicing loans, they lobbied strenuously against this bill. Even Science Careers received some messages from the industry.
The restructured program will convert savings from loan subsidies and guarantees to private lenders into new Pell grants for low- and moderate-income students. As we noted two weeks ago, however, the original estimate of $87 billion in savings over 10 years has shrunk as institutions have gotten a head start, substituting direct lending for private loans in anticipation of the bill's passing. The New York Times puts the savings estimate at $61 billion, with most of the savings ($36 billion) going to fund Pell grants.