Overhaul Of Student Loan System Taking Shape
Story from the Chronicle of Higher Education

Washington — Congress may be consumed with health-care reform right now, but behind the scenes, education-committee aides have been quietly crafting legislation to overhaul the student-loan system, with a meeting to review a draft bill possible in the House as early as next week.

College and student-loan lobbyists said they hadn’t seen any draft language yet, and a spokeswoman for the House education committee stressed that a meeting had not been scheduled. Still, lobbyists have been told that such a meeting may occur between June 24 and July 9.

Lenders are holding out hope that Congress will reject President Obama’s proposal to eliminate the bank-based private student loans program, or at least preserve a role for lenders and guarantors in a revamped system. One lobbyist counted as many as 13 counter-proposals circulating in Congress, including a detailed alternative from the lending giant Sallie Mae.

The Congressional Budget Office estimated in March that switching all loans to the government-run direct-loan system would save taxpayers $94-billion over 10 years.

Still, many lenders privately acknowledge that the House is likely to adopt the president’s approach, perhaps with minor modifications, because of the savings it would generate.

The Congressional Budget Office estimated in March that switching all loans to the government-run direct-loan system would save taxpayers $94-billion over 10 years. In a re-estimate issued today, the office adjusted that figure downward slightly, to $87-billion.

Either way, lawmakers are not expected to use the savings to make Pell Grants an entitlement, as Mr. Obama has proposed. Instead, they are likely to provide an infusion of “mandatory” money for the program, while allowing appropriators to continue to set the maximum award, lobbyists say.

The powerful chairmen of the Appropriations Committees in both chambers of Congress have objected to Mr. Obama’s plan on the grounds that it would put a ceiling on the maximum award. Under the president’s proposal, the maximum Pell Grant would increase each year at a rate equal to the Consumer Price Index plus a percentage point.