Plan to expand student loans will be part of reconciliation bill

WASHINGTON — A dramatic expansion of the federally issued student loan program will be included in the same reconciliation bill as health reform, House Democratic officials and the White House officials have confirmed.

“The current plan is to also have the higher education bill that also passed the House be part of the reconciliation package,” said Dan Pfeiffer, White House communications director.

Federally subsidized private loans would be eliminated and replaced with the federal Direct Loans program. Money saved would be used in part to offer more Pell grants and reduce the cost of the health care package. The plan — which already passed the House as a stand-alone bill — would affect most higher education institutions, though not the University of Minnesota, which made the switch to Direct Loans about 15 years ago.

There are three key reasons Democrats want to put student loans in the reconciliation bill. First, they want it to pass and there’s almost no way they could overcome a filibuster in the Senate, given that some in their own caucus (as well as vast majority of Senate Republicans) openly oppose it. Second, some House Democrats, like Education and Labor Chairman George Miller, say adding the student loans bill to health reform might make it easier for some undecided Democrats to vote yes.

Finally, the measure is forecasted to save money overall (in part because the government will make more money through issuing more loans), so it allows Democratic leaders some wiggle room on the costs of health reform.

Passing the measure is a bit more technically complex, but basically Democrats hope to write a rule for the reconciliation bill that deems the Senate’s health care bill passed if the reconciliation bill passes. Rep. John Kline today led a group of Republicans, who already don’t like the health care bill or the student loan plan, in opposition to both the bills and what they called the “unusual” tactics Democrats want to use to pass them.

“Now we are in this unusual position… where the House leadership is looking at convoluted parliamentary procedure to make sure that their members don’t have to vote on the Senate bill and to work a way to get this government takeover of the student loan industry put in at the same time,” Kline said, adding that the current system is working “pretty well” as judged by the fact that some 4,000 schools use subsidized loans rather than the Direct Loan program.

“We ought to be looking at ways to make sure that private capital is in the student lending business, not ways to, by statute, prevent it from being there,” he said.

Sen. Al Franken, however, said the country should take a lesson from the U’s example.

“To me, this whole discussion boils down to a simple question,” Franken said in a statement following a press conference on student loans last week. “Are we going to continue wasting billions of dollars on subsidies to banks, or are we going to use the money to help students go to college? In this tough economy, when so many students are struggling to afford college, it just doesn’t make sense to me that we would choose banks over students.”