Health Care Reform Could Revamp Student Lending Health care overhaul could help Democrats get student aid reforms passed. The change would shift lending from private banks to the Education Department. Advocates say it could save at least $67 billion, which could be put back into more financial aid for needy students.
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Health Care Reform Could Revamp Student Lending

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Health Care Reform Could Revamp Student Lending

Health Care Reform Could Revamp Student Lending

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From NPR News, it's ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Melissa Block. The vote on the health care bill could turn into a two-for-one deal. Democrats are planning to tack on a plan to overhaul the federal student loan program.

The Obama administration says the government could save tens of billions of dollars by cutting out banks and lending money directly to students. It's a risky move that could revive, or sink, two of the administration's top priorities. NPR's Claudio Sanchez reports.

CLAUDIO SANCHEZ: Removing private lenders from the federal student loan program was never going to be easy, but why is this proposal now part of the up-or-down vote on the health care bill? Even Education Secretary Arne Duncan says he doesn't know.

Secretary ARNE DUNCAN (Department of Education): I know that this is the right thing to do for our nation's students. It's the right thing to do for taxpayers.

SANCHEZ: Duncan says bypassing private lenders and having the Department of Education lend directly to college students would save at least $67 billion, money that could be put back into much more financial aid for needy students and other education programs.

Sec. DUNCAN: $67 billion is a huge amount of money.

Senator TOM HARKIN (Democrat, Iowa): This is excellent public policy. It's also good politics for Democrats and Republicans alike.

SANCHEZ: That's Senator Tom Harkin, Democrat of Iowa, speaking to reporters last week. He helped craft the plan to attach the direct lending proposal to the health care bill.

Sen. HARKIN: I also want to add that our bill would reduce the budget deficit. Yes, you heard me right. Our bill would reduce the deficit by at least $5 billion.

SANCHEZ: Harkin called this sweetening the pot, but that assumes that it would attract the votes to pass both health care and major education legislation. Harkin says it would be a twin victory.

Mr. JOHN DEAN (Special Counsel, Consumer Bankers Association)): I would disagree with Senator Harkin.

SANCHEZ: John Dean is special counsel to the Consumer Bankers Association, which has lobbied like crazy to persuade Congress to reject direct lending. Dean says if it passes, private lenders would have to cut 35,000 jobs, the nation's long-term debt would go way up and borrowers would have fewer choices.

Attaching direct lending to health care means no Republican is likely to vote for it, and, says Dean, some Democrats may not vote for it either because the proposal would save $20 billion less than what the administration said it would.

Mr. DEAN: The original bill was too good to be true. Some Democrats are learning that the money is not there for community colleges. It's not there for early childhood. I suspect that some of them will start to worry a little bit about what else is going to be changed in the legislation.

SANCHEZ: Those who have supported direct lending admit that it would not have passed the Senate on its own because the political landscape has deteriorated since last September when it passed the house. Rich Williams is with a U.S. Public Interest Research Group.

Mr. RICH WILLIAMS (U.S. Public Interest Research Group): Also, the economy got worse, and more students were going back to school. The demand for Pell Grants skyrocketed.

SANCHEZ: This is, in fact, why the savings that the Obama administration once touted had to be scaled way down, making the whole idea less attractive. Now, says Williams, so much is happening behind closed doors that nobody knows what the direct lending proposal will look like.

But even if the health care bill is shot down, and direct lending goes down with it, the Department of Education will continue to run at least a modest version of the program. Claudio Sanchez, NPR News.

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