NAICU Washington Update

Student Aid Reconciliation Stalled by Health Care? It's Complicated.

February 10, 2010

It is our understanding that the Senate education committee may have the student aid reconciliation bill ready to go.  However, the committee apparently is waiting for a decision on how to move forward with the health care reform legislation before taking action.  The bill would convert all student loans to direct loans; put the savings generated by that switch into increasing the Pell Grant maximum by CPI plus 1 percent, reaching at least $6,900 by 2018; expand Perkins Loans; engage states in broad-based education reform; and fund community college and early childhood education reform.

The thinking in the Senate is that the student aid bill represents a last resort for passage of a health care reform bill via the reconciliation process.  Reconciliation is a budget mechanism to ensure mandatory spending cuts and deficit reduction, and enjoys special rules in the Senate that prohibit filibuster and require only a simple majority for passage (51 votes). 

In last year's budget resolution, Congress provided for student loans and health care to be reformed using the reconciliation process.  However, that resolution stipulates that if reconciliation is used, there can only be one vehicle (or one vote) on the combined proposals.  Moving the health care legislation under regular order in the Senate seems to have fallen apart, now that there don't apperar to be the 60 votes needed for passage.  This turn of events makes the student aid reform bill the last possible vehicle to move health care.  

All reports we have heard point to floor action on a reconciliation package later in February.  Senate HELP Committee Chairman Tom Harkin (D-Iowa) was recently quoted in the National Journal's "Congress Daily" as saying, "We have the votes."

But Wait, There's More . . .

Attaching the health care bill is not the only sticking point in getting the student aid bill done in the Senate, though.  When the House passed its student aid bill in September, the Congressional Budget Office scored its provisions as (1) the conversion to direct lending saving $87 billion, (2) the Pell Grant increases costing $40 billion, (3) $10 billion going to deficit reduction, and (4) the remainder spent on the other reform provisions in the bill.

That score is based on the March 2009 CBO baseline, which is valid until Congress enacts this year's budget resolution (for FY 2011).  However, since that estimate, three major changes have occurred.  First, more colleges have already converted to direct lending in anticipation of this legislative mandate.  Then Pell Grant eligibility soared way above expectations, resulting in vastly increased costs for the program.  Finally, the federal government has purchased more private loans through the temporary ECASLA legislation than anticipated. 

Bottom line of all of this:  The estimated savings from converting to direct lending stays constant, but the cost of the Pell grant increase rises from $39 billion to $56 billion over 10 years.  No one knows whether or not these changed costs will affect the fragile Senate majority appearing to support the bill.  Passage of the student aid reconciliation bill could get just as complicated as health care in the coming months. 


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