Immediately after pulling an all-nighter debating the Iraq War, the Senate on Wednesday began consideration of its higher education reconciliation bill to cut lender subsidies and increase need-based aid for students.
Discussion of the bill got off to a slow start and was dominated by Democrats praising the various provisions in the bill. The debate is expected to pick up today as a contentious bipartisan amendment is introduced to reduce proposed lender subsidy cuts. The Bush Administration also issued a statement of administration policy threatening to veto the bill yesterday.
The amendment, expected to be introduced by Sens. Ben Nelson (D-NE) and Richard Burr (R-NC) would reduce the proposed subsidy cuts on the special allowance payments made to for-profit lenders from .5 percent to .35 percent. This would make the proposed cuts to for-profit lenders equal to the proposed cuts to non-profit lenders.
Supporters of the amendment argue that it is a reasonable compromise because a .5 percent cut would prevent lenders from offering borrower benefits and would force many smaller lenders out of the student loan business completely because it would no longer be profitable for them.
They point to a new study by FinAid.org Publisher Mark Kantrowitz which concludes that the proposed subsidy cuts are severe enough to make smaller lenders unprofitable.
"This new independent analysis speaks for itself," said Kevin Bruns of America's Student Loan Providers (ASLP). "Kantrowitz's examination exposes the irrationality of making severe cuts in lender payments when margins are already thin."
Those against the amendment argue that lenders would still turn a profit even with a .5 percent cut to their special allowance payments and that the amendment would take roughly $3 billion from students and give it to banks.
An document circulated to rally opposition to the amendment claims that a .5 percent cut would not harm borrower benefits because lenders don't spend much on benefits because few students actually qualify for the benefits. It also points to the record profits of the largest lenders as proof that current subsidies are excessive.
The Senate is expected to vote on this amendment today, but it remains unknown if there will be enough support to adopt it.
Meanwhile the Administration stated that it "cannot support Senate passage of S. 1762 in its current form because of serious concerns with some provisions of the bill." The Administration said it can't support the bill because:
- new spending should be incorporated into the current Pell Grant program in order to avoid unnecessary complication to the student aid programs and their administration
- the approaches taken to reduce lender special allowance pavements differ from the House bill and from the President's Budget, and the Administration intends to work with Congress on how best to implement fair reductions and avoid unintended consequences that may lessen savings.
- the bill provides multi-year mandatory funding to create three new programs that poorly target aid to needy students and serve narrow constituencies. Further, scoring for this bill only counts mandatory programs and does not reflect the substantial increases in discretionary spending, like changes to the student aid need analysis provisions that will result in nearly an additional $1 billion in Pell Grant costs for FY 2009.
- the student loan auctions as proposed by the bill would reduce choices for students and parents and involve enormous implementation issues that threaten to disrupt services and limit loan availability.
- the bill's loan forgiveness provisions are a costly and inefficient way to encourage students with debt to pursue specific professions. The Administration is particularly concerned with the bill's proposed loan forgiveness for public-sector employees, a new benefit that would be available only to borrowers in the Direct Loan program.
- for some borrowers, the proposed income-based repayment provisions could result in a significant and growing debt burden due to substantial amounts of capitalized interest on their loans.
NASFAA joined a host of other higher education associations in a letter to Senators urging them to support the bill.
"We deeply appreciate this bold step toward expanding the federal government's commitment to educational opportunity for all who are qualified to pursue a college education," the letter states. "We also trust that it will result in a significant expansion of funding for the Pell Grant program that will be delivered in the most efficient way to the neediest of Pell Grant recipients."
The Administration's statement also expresses "grave concerns" about the Senate's Higher Education Act reauthorization bill (S. 1642), which was passed out of the Senate education committee but has not been brought to the Senate floor for debate. Senate education committee Chairman Edward Kennedy (D-MA) and its ranking member Michael Enzi (R-WY) both said they hope to bring the bill before the Senate soon after approving the reconciliation bill. Specifically, the Administration is concerned that the reauthorization bill:
- would create a number of new programs and reauthorize several programs the Administration proposed to terminate
- sets a precedent by interfering with the Secretary of Education's ability to properly administer and rigorously evaluate any TRIO program, including Upward Bound;
- restricts the ability of the Secretary to collect student-level data and make it available in the aggregate to better inform parents and policymakers
- creates tuition price controls through a "higher education price index"
- has "Student Loan Sunshine" provisions that the Administration believes need further work to address technical problems.
Debate will continue today and NASFAA will continue to monitor and report as things develop. You can also watch the debate live on C-SPAN 2 cable TV or online at the C-SPAN Web site.
Other Media Coverage:
By Haley Chitty
NASFAA Assistant Director for Communications
Posted 07/19/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
