Student Lending: The Forgotten Reform

With today’s headlines screaming (perfectly legitimately) about last night’s health reform votes, it’s easy to forget that House lawmakers also passed the most sweeping reforms to hit the nation’s student lending system in decades.

The health care reconciliation bill, while predominately made up of health-focused reforms, also included language to eliminate the Federal Family Education Loan program, under which the government subsidizes private lenders that cater to students — and guarantees those loans so the private companies assume no risk when loans default. Instead, under the Democrats’ bill, all loans would originate directly from the U.S. Treasury (though private lenders would still compete to service them).

The Congressional Budget Office estimates that the changes would save the government $61 billion over the next decade, most of which would fund an expansion of scholarships for low-income college students.

The reconciliation bill, of course, still has to clear the Senate to become law. And while the Democrats say they have the 51 votes to pass it, they’ve been reluctant to release the names of those supporters. The focus of the Senate debate is sure to be on the health care side of things, with conservatives on both sides of the aisle blasting provisions like the new 3.8 percent tax on unearned income. But it’s worth mentioning that a good handful of Senate Democrats might also oppose reconciliation based on the lending reforms.