Details on Student Aid Bill Emerge (Update)

Here is the fact sheet:  http://edlabor.house.gov/documents/111/pdf/publications/20100318StudentAidandFiscalResponsibilityAct.pdf

Here is the bill out of the Rules Committee:  http://docs.house.gov/rules/hr4872/111_hr4872_amndsub.pdf

Here is how the $61 billion in savings (I assume rounding explains why the totals come closer to $62 billion) identified by CBO in their recent estimate would be spent in this bill:

	Amount
Program	(In Billions)
Pell Grant	$    36.0
Investment in HBCU	$      2.6
Community College Grants	$      2.0
Income-Based Repayment	$      1.5
College Access/Completion	$      0.8
TOTAL	$    42.8
Deficit Reduction	$    10.0
Transfer to Health Care	$      9.0
TOTAL	$    61.8

From a big picture perspective, the earlier SAFRA bill invested $77 billion in education ($87 billion less $10 billion in deficit reduction) compared to $43 billion in this bill, a 44% drop.  Much of that decline can be attributed to the reduced savings estimate that came from the CBO score earlier this month.  In addition, there is $9.0 billion going over to the health care side of the ledger in this reconciliation package. 

Here are details of how the money is being spent in the bill:

• Pell Grants:  Increase maximum from $5,550 to $5,975 by 2017.  Will be linked to CPI (not CPI + 1% as in earlier bill) beginning in 2013.
• Income-based repayment:  Will lower monthly cap to 10% of discretionary income (from 15% today) beginning in 2014
• Community Colleges:  $2 billion to develop and improve educational or career training programs
• Historically Black Colleges and Universities and Minority-Serving Institutions:  support services to increase completion rates
• College access and completion support:  increase funding for College Access Challenge Grant and fund financial literacy and retention programs at states and institutions

Here are some additional details provided by a Democratic congressional aide familiar with the bill:

• Bill retains the carveout for non-profit servicers; appear to be on similar terms to what was in the original SAFRA bill that passed the house (see details here)
  • From the bill:  "IN GENERAL.—The Secretary shall contract with each eligible not-for-profit servicer to service loans originated under this part, if the servicer—"(I) meets the standards for servicing Federal assets that apply to contracts awarded pursuant to paragraph (1); and "(II) has the capacity to service the applicable loan volume allocation described in subparagraph (B).
• $50 million available to assist the Dept. of Education and institutions in making the transition to Direct Lending
  • From the bill:  "The Secretary shall provide institutions of higher education participating, or seeking to participate, in the loan programs under this part with technical assistance in establishing and administering such programs."
• $50 million is available to companies as incentive to rehire employees that would be displaced by this transition to Direct Lending
  • Here is the language in the bill:  "The Secretary shall provide payments to loan
    servicers for retaining jobs at locations in the United States where such servicers were operating under part B on January 1, 2010."
• Bank of North Dakota, a state owned bank, will continue to make federal student loans as an intermediary through the government.
  • Agreement with state-owned bank (see page 145 of bill)
  • See Senator Conrad's change of heart described below
• No Perkins Loan expansion or investment in Early Childhood education included in the bill.

-----------------------------------
Related articles:

• Washington Post reported on industry opposition to the bill: 

"An industry organization called the measure a "loser for students," noting that some savings from the lending overhaul would help offset the federal deficit in a bill that doubles as a vehicle for health-care reform.

"Should students be paying for their neighbor's medical costs?" America's Student Loan Providers said in a statement. "Separate consideration of student loan reform is imperative to ensure that legislation that minimizes job losses and reinvests savings in higher education can be considered..."

"....Executives with Reston-based SLM Corp., the industry leader known as Sallie Mae, say employees in several states have pressed Democratic lawmakers to reconsider.

"There's a viable solution on the table that would essentially deliver the same benefits to students and not cost jobs," said Conwey Casillas, Sallie Mae's vice president for public affairs. "That's why [employees] are so passionate about it." Democrats dispute his argument."

• Campus Progress provides perspective on the job loss claims based on interviews with several former SLM employees based in Indiana.  

• The New York Times provided some details on how the current bill differs from the SAFRA bill passed by the House: 

"But it is also true that the student-loan proposal has been cut back sharply from the Student Aid and Fiscal Responsibility Act that the House passed in October, based on a previous Congressional Budget Office estimate of $87 billion in savings.

The House bill provided billions for the construction, modernization and repair of school and community-college buildings, billions more to early childhood education, and further billions to help community colleges improve their graduation rates. All those have been eliminated, although community colleges would still get some new financing under the legislation.

Then, too, the House bill called for increasing Pell grants each year by the consumer price index plus 1 percent starting in 2013, to $6,900 by 2019. But to save money, the extra 1 percent was eliminated.

One of the few areas not cut was $2.55 billion for historically black and minority-service colleges, which remains the same as in the House legislation."

• The Chronicle of Higher Education questioned whether even the $36 billion set aside in the bill for Pell Grants was sufficient given the sharp increases in that program recently:

"The biggest chunk of that estimated savings, $36-billion, would be used to increase the maximum Pell Grant (see chart). That maximum, now scheduled to reach $5,550 in the coming academic year, would increase by the rate of inflation over most of the next 10 years. The Obama administration had asked Congress to approve an annual increase equal to the rate of inflation plus one percentage point. The final agreement eliminated the additional percentage point and delayed the start of the annual increases until 2013.

Even with the additional money, it's not clear that Congress has set aside enough money to meet its promises under the Pell Grant program, as rising college enrollment is predicted to drive up demand. Congress approved a $19-billion budget for the Pell Grant program in the last fiscal year, and another $17-billion in the economic-stimulus measure approved last year. And yet more than $13-billion of the amount contained in Thursday's agreement would be dedicated to paying off accumulated budget shortfalls in the program."

• The Hill is reporting that Senator Conrad had reversed himself this evening on what the Republicans termed  "The Bismarck Bank Job", the carve-out for the Bank of North Dakota to continue making federal student loans (After the Cornhusker Kickback and Louisiana Purchase, did he really think this would escape notice?):

“I called over to say take it out,” Conrad said. “There’s no sense in having a distraction on a bill this important.”

Conrad lamented that the debate over healthcare reform has become so political that it has become very difficult to discuss a proposal on policy grounds.

“You can’t have a debate on the merits around here,” Conrad said.

• Wall Street Journal lays out the next steps with the legislation. 

Comments

[Jeff Grimm]

9 billion transferred to Health Care....what a garbage bill

[Bizzaro Watchdog]

Look at all those savings Tim! Yippee!!!! Who's saving though? Is it the taxpayer? I don't see anything in your breakdown like a refund for the average-day American--is it in there or am I just blind? (Maybe George Miller was just telling a "little" white lie when he said that the taxpayers would save money!) Or, maybe, Miller's just an ideologue who can't justify this legislation with the truth--so, he lies about it instead!

This is just another liberal share-the-wealth bill. Only, Americans will be sharing more of their wealth so that a chosen few can attend college (the liberals have utterly failed our country in delivering a cheap college education). And of course, the liberal/higher education complex will continue to be the ultimate beneficiaries of all this taxpayer largesse!

The bottom-line from your fearless leadership in Congress and the White House--choke on it America!

[Craigie]

Over the past 30 years, significant savings from various federal student loan amendments has gone to the U.S. Treasury/deficit reduction -- with much resentment along the way from the education business, postsecondary institutions, the lending business, the access advocates, etc. Now that most of the savings is actually getting plowed back into postsecondary education, rather than "dumped into the general Treasury," you would think that everyone would be ecstatic.

[Katie Dunneback]

Craigie, the only people that don't like it are the lenders.

I'm ecstatic!