When we last checked in on the proposed Student Aid and Fiscal Responsibility Act, which aims to reform the student loan process, the bill had passed the House of Representatives but stalled in the Senate due to a threatened Republican filibuster. The New York Times reports this morning that Democratic leaders in both houses of Congress have worked out a deal to move the bill to a vote.
According to the Times, the deal would fold the student loan bill into the Senate’s health care reconciliation bill, which needs a simple majority (50 + 1 votes) to pass rather than the 60 votes needed to break a filibuster. Senate rules allow the use of the reconciliation method only for budget-related legislation, and most provisions of the student loan bill meet that criterion. Ezra Klein of WashingtonPost.com has a good, brief explanation of the reconciliation process proposed for the health care bill.
The student bill would end the role banks and and other private lenders play in making student loans. Students now can borrow money from private lenders through the Federal Family Education Loan Program, which provides subsidies and guarantees to banks and other lenders. Students or their families can also borrow directly from the U.S. government’s Federal Direct Loan Program. The bill would fold all lending into the Direct Loan program, leaving the private sector with a much-reduced servicing role.
The bill would also redirect the anticipated savings from the end of private-lender subsidies to more funding for the Pell grant scholarship and Perkins loans that students can get through their institutions. When the bill passed the House in September, the Congressional Budget Office estimated those savings at $87 billion over 10 years. The Times this morning says that many institutions, in anticipation of the new bill, have increased their use of federal money for Perkins loans to students, thus reducing the amount of private loans. Because of this cutback in private student loans, the estimated savings are now down to $67 million over 10 years.