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Huge Student Loan Overhaul Set to Be Tacked Onto Health Care Reform

4 years ago
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Members of the House are poised to vote this week to add a major overhaul of the student loan industry to the health care reform bill that the House will vote on this week.

Before the House Budget Committee began its mark-up of the health care legislation, Chairman John Spratt (D-S.C.) explained that the 2010 Budget Resolution that passed the House last April instructed the House to pass a reconciliation bill with health care reform and education reforms in one package this year. "It will result,'' he said, "in landmark investments in higher education, making higher education more accessible and more affordable, and will do so without adding to the deficit."

The student lending bill easily passed the House last September by a vote of 253 to 171. The legislation eliminated the role of private lenders, which have received billions of dollars in federal subsidies and guarantees over the last 35 years to encourage them to lend to students. Instead, students would now get their loans directly from the Department of Education starting July 1 of this year.

The Congressional Budget Office estimated Monday that eliminating private loan providers from the process will save the federal government $40 billion over 11 years as it moves $1.4 trillion in loans from private to public origination. Although those savings are substantial, the House originally estimated its bill would save $87 billion, with $40 billion of that redirected to expand Pell grants and Perkins loans for needy students. The lower CBO score means that fewer left-over savings can be directed to other programs, like health care.

Although the measure enjoyed broad support in the House, senators were not as receptive. Six moderate Democrats, including Senators Ben Nelson of Nebraska and Bill Nelson of Florida, along with Senators Blanche Lincoln of Arkansas, Tom Carper of Delaware, and Mark Warner and Jim Webb of Virginia, objected to the changes in the program, mostly because companies in their states employ thousands of people involved in the student loan industry.

As recently as last week, Nelson told The Washington Post he would vote against the reconciliation bill if the student loan language is added. Carper warned that it would be "problematic" to combine student lending and health care reform.

So why would Congress make the difficult job of passing health care reform even harder by adding an unrelated bill to it? Because some think it might actually make heath care easier to pass.

Not only was the lending bill popular on the House side, where Democrats are still trawling for votes, the Senate rules for reconciliation said that health care reform and education reform could be combined for budgeting purposes. The reconciliation bill requires the Senate Health committee to find $1 billion in budget cuts over five years, and allows it to find the savings in either education or health care.

Finally, the student loan bill would probably not pass the Senate this year if filibuster rules applied. With several Democrats on the record as skeptics and few Republican champions to strengthen the vote, grafting the measure onto a must-pass bill like health care reform is the Democrats' best hope to keep it alive.

Last week, the Senate Parliamentarian--the health care referee--ruled that student loan reforms can be added to health care reform, and Sen. Kent Conrad, once a critic of the process, said he was leaning toward including it.

So it looks like a go for student loan reforms, for now.

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