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Fight brews over student loan bill
By Elana Schor

An election-year message war is brewing over the growing cost of college, as liberal-leaning and union-backed advocacy groups back a Democratic bid to halve student-loan interest rates while Republicans decry the politicization of education.

Rep. George Miller (D-Calif.) and Senate Minority Whip Dick Durbin (Ill.) introduced bills before the Easter recess that would halt the scheduled July 1 increase in interest rates for federally subsidized student loans, reducing the fixed rate from 6.8 percent to 3.4 percent. Miller and Durbin last week helped launch a coordinated grassroots campaign aimed at promoting the bill among college students and their parents.

“The Republican majority knows that poll numbers show people are looking for change and a different direction,” Durbin told reporters at the campaign launch. “Many Republicans looking to take a more moderate position and break away from the positions of the Bush administration will be looking at this approach.”

Durbin and Miller vowed to force test votes on their plan in both chambers before summer, having already attracted eight GOP centrists last month when Miller offered a one-year interest-rate cut as a substitute amendment to the House’s reauthorization of the Higher Education Act (HEA).

Steve Forde, spokesman for House Education and the Workforce Committee, pointed out the high cost of a permanent cut, estimated at more than $30 billion over five years.

“The fact that they really don’t talk about a way to pay for the legislation shows how serious they are about it,” Forde said. Parrying the Democratic bill’s promise to “reverse the raid on student aid,” Forde noted that Democrats endorsed the 6.8 percent interest rate when it was first set in 2002.

Miller, ranking member on Education and the Workforce, anticipated a pushback on costs by the majority but directed the charge of fiscal irresponsibility back at Republicans.

“They say that to every proposal because they’ve given all the money away in tax cuts,” Miller said. “They decided they would do nothing about the cost of education other than making it more expensive for students and families. We want to take the country in a very different direction.”

The National Education Association (NEA) and American Federation of Teachers, which represent school officials at all levels of the system plan to formally endorse the interest-rate cut this week. NEA lobbyist Nancy O’Brien echoed Miller’s argument: “It’s a question of priorities, saying we can’t afford this but we can afford tax cuts for the wealthiest among us,” O’Brien said.

Rep. Ric Keller (Fla.), who chairs Education and the Workforce’s competitiveness panel, dismissed the Democratic bill as politically motivated public relations. Keller and other Republicans have compiled a one-page memo called “Fixed Rate Flip-Flops” listing past praise of the 6.8 percent rate by Miller and many of the groups behind the grassroots campaign.

“The American people are tired of partisan political stunts and misleading slogans,” Keller said in an interview. Durbin and Miller’s “raid” refers to the $12.5 billion cut in student aid programs passed earlier this year as part of budget reconciliation, but Keller said the bulk of the cuts hit banks and other lenders in the pocket, not students.

“When you hear Democrats and other groups complaining [about the cut] … not one student in America will receive less financial aid under that act” or the HEA reauthorization, Keller said. “If some lenders wanted to complain a little bit, they have some room to complain, but student groups have no room to complain.”

Most lending banks, however, would not see profits fall if subsidized interest rates were cut. Preset funding formulas require the government to ensure a reliable return for banks regardless of the interest paid by students or parents, and some banks could even benefit if Durbin and Miller’s bill entices more low-income students to consider college.

“Enactment of the Durbin bill would not reduce banks’ profits in the least because the lender return is based on the special allowance formula rather than the borrower interest rate,” said John Dean, special counsel to the Consumer Bankers Association, which represents some of the student-loan market’s top lenders. “Banks receive the same return on student loans under the Durbin bill that they do under current law.”

Durbin’s version of the bill also mandates full funding for Pell Grants, which the House HEA reauthorization boosted to a $6,000 maximum despite Congress’s four-year pattern of freezing actual appropriations for the grants at $4,050. Keller said he would support appropriating enough money to fill the Pell Grant funding gap, and touted the $5.4 billion jump in total Pell Grant spending since 2000.

“It’s a Herculean effort,” Keller said. “With that said, yes, I’d like to see it fully funded. I’d vote for that. But it’s out of my hands. It’s in the appropriators’ hands.”

While lending banks have not come out for or against Durbin and Miller’s bill, largely thanks to their lack of a direct interest, the Pell Grant provision could benefit from their lobbying muscle. Kevin Bruns, executive director of the America’s Student Loan Providers coalition, said member companies would discuss the bill in coming days.

“The richer the Pell Grant program aid is, the more students go to school, and we’re all better off with more students in school,” Bruns said. “So we have long supported the increased generosity of the Pell Grant program.”

Dean agreed on the bill’s potential benefit to students, but he predicted that its price tag would be its downfall.

Robert Borosage, co-director of the Campaign for America’s Future (CAF), one of Durbin and Miller’s advocacy-group allies, said the student-aid legislation would help galvanize voter turnout on college campuses regardless of its ultimate fate.

“Politicians of either party don’t have much to say to young people these days. Students are exercised about the war, but even more about these kinds of questions,” Borosage said.

Miller and committee Democrats have opened an online “e-hearing” to solicit personal testimony from students and parents seeking relief from skyrocketing college tuition bills. Both US Action and the Campaign for America’s Future are targeting Republican lawmakers with student-aid petition drives, the AFL-CIO and other major unions are tapping their memberships, and on-campus organizing drives are in the works at the U.S. Student Association, the Center for American Progress, the College Democrats and Young Democrats of America.

Technorati Tags: federal student loan, federal+student+loan, finance, financial aid, financial+aid, financialaid, news, politics

House to Take Up Measure to Boost Pell Grants, Alter Student Loan Rules
Source: Congressional Quarterly Today

The House is beginning debate on a bill that would authorize larger Pell grants for low-income college students, increase competition for consolidated student loans and endorse an “academic bill of rights” proposed by conservative activists.

The legislation (HR 609) — introduced by Majority Leader John A. Boehner, R-Ohio, when he was chairman of the Education and the Workforce Committee — would renew many provisions of the 1998 Higher Education Act (PL 105-244), which authorizes more than $70 billion in federal aid to college campuses and students.

The law was set to expire at the end of fiscal 2003, but has been extended several times as Congress has debated a broad rewrite. The most recent extension (PL 109-150) expires March 31. On Tuesday evening, the Senate cleared a new extension (HR 4911) lasting through June 30.

Direct and guaranteed student loan programs, which entail mandatory spending, were reauthorized for eight years by the fiscal 2005 budget reconciliation law (PL 109-171) enacted last month. That law made changes to the loan programs that raised interest rates and fees paid by students or their parents; cut some subsidies to lenders, and reduced federal spending on the programs by $12.7 billion over five years

The bill that the House is considering Wednesday and Thursday includes other provisions pertaining to the loan programs.

One would eliminate what is known as the “single-holder” rule for loan consolidations. That rule — long supported by Sallie Mae, the heavyweight of the college loan industry — requires student and parent borrowers to consolidate, or refinance, their loans with the lender that originally made them, even when they can obtain lower interest rates elsewhere.

“We anticipate, — and have anticipated for quite a long time now — that it would be repealed,” said Tom Joyce, a spokesman for Sallie Mae. “We welcome the competition.”

The bill also would boost the maximum authorized Pell grant for low-income students to $6,000 from $5,800 per year. However, since Pell grants are subject to appropriations, the actual maximum Pell Grant would depend on the amount appropriated for a given year. (The current amount appropriated permits a maximum of only $4,050.)

The bill would also authorize a new “Pell Grant Plus” program that would allow an additional $1,000 in each of the first two years of college. The total from the Pell Grant Plus program, the regular Pell grant and other federal financial aid programs could not exceed the cost of attendance.

Non-binding language in the bill that would encourage universities to not discriminate against students based on “personal political views or ideological beliefs” has been controversial, though no one offered an amendment to strike it. Republicans included the “academic bill of rights” language at the behest of conservative activists who contend that a liberal political climate at many universities has resulted in harassment of students with conservative views.

The bill also would make it easier for private for-profit colleges to compete for federal aid by redefining the term “institute of higher education” to include accredited for-profit colleges. Public and nonprofit universities argue that taxpayers should not be asked to subsidize for-profit schools. But Republicans say for-profit schools are increasingly important for “non-traditional” students, especially those changing careers.

Tuesday morning, negotiations aimed at reaching a consensus within the Education and the Workforce Committee on a rewrite broke down after ranking Democrat George Miller of California told Chairman Howard P. “Buck” McKeon, R-Calif., he could not achieve a consensus among Democrats to support the bill.

“For some reason there was a meeting of minds among the Democratic leadership that from this morning forward, this was going to be a partisan bill,” McKeon told the Rules Committee, which Tuesday night was considering which amendments would be allowed on the floor.

“We just don’t think that this is a marquee higher education bill,” Miller said, explaining that “possibilities were lost” when Republicans included the student loan changes in the reconciliation law. He called the bill “leftovers” and said he was offering a substitute amendment that would lower student loan rates, create new programs aimed to increase college attendance by black and Hispanic students and allow students to collect Pell grants year-round.

McKeon will offer a substitute amendment backed by committee Republicans. It would set a fiscal 2007 starting date for all reauthorizations in the bill, lasting for the succeeding five years. It would retain current law for the campus-based aid formula and require a Government Accountability Office study of that formula; add three new schools to the list of named institutions authorized to participate in the Historically Black Graduate Institutions program and allow funding to support anti-piracy efforts on college campuses.

Loan Program

The Rules Committee on Tuesday night began considering more than 100 proposed amendments to the bill. Rather than completing that job, the committee approved a rule that will allow the House to begin debating the bill and 15 amendments on Wednesday.

The list of 15 includes one by Dan Burton, R-Ind., to require colleges and universities that receive funds under international education programs to disclose contributions and gifts under the Integrated Postsecondary Education Data System. A bipartisan group of five House members will offer an amendment to authorize funds to recruit and train a national corps of top recent college graduates who commit to teach in low-income communities. Melissa A. Hart, R-Pa., will offer an amendment to establish student services offices that can assist pregnant students and students who are already parents in locating child care, family housing, flexible academic scheduling and various counseling and support services.

The Rules Committee is expected to meet again on Wednesday to approve another rule that would outline any additional amendments that would be allowed, and provide for a final vote on the legislation Thursday.

Among the amendments under consideration by the Rules panel was one by Tom Petri, R-Wis., cosponsored by Miller, to encourage colleges to use the government’s direct loan program, rather than government-subsidized loans sold by Sallie Mae and other lenders.

Several government studies have said the direct loan program is more efficient; White House budget officials agree. But Boehner and many other Republicans prefer providing loans through private lenders.

Another proposed amendment, by Rahm Emanuel, D-Ill., would repeal three student loan provisions recently enacted in the budget reconciliation law. Emanuel’s office said in a news release that the changes totaled a $12 billion decrease in student aid.

Technorati Tags: college, education, financialaid, loan, news, politics, student loan, student+loan

When the T-Bill rate was hovering around 1%? Sadly, those days are long, long gone. Nowadays, the T-Bill is floating at 4.688% - and that means expensive loans for everyone.