'Cuts' or 'Savings' for Student Loans?

They argued about numbers. They debated definitions. They challenged each other's "facts."

October 27, 2005

They argued about numbers. They debated definitions. They challenged each other's "facts."

But ultimately, the Republican and Democratic members of the House of Representatives Committee on Education and the Workforce followed their preordained scripts Wednesday in passing, along party lines, legislation that would "cut" (or "save," as the Republican majority preferred) $15 billion from the federal student loan programs and shift the funds to the general federal budget for an array of non-higher education purposes, to the dismay of college officials.

It was clear from the very start of the long and drama-less drafting session that the top Republicans on the education committee, having agreed to cut more than $18 billion from the programs under their jurisdiction as part of a larger "budget reconciliation" effort by House leaders to cut $50 billion, would stick together and pass the legislation, which the panel's chairman, Rep. John A. Boehner (R-Ohio), said would "strengthen higher education programs and expand college access for low- and middle-income students," while doing the committee's part to reduce the burgeoning federal deficit.  

The only thing left for Democrats to do, given that they clearly did not have the votes to stop (or even amend) the measure, was to score political points by portraying the bill over and over again as one that would take money out of students' pockets to pay, among other things, for tax cuts for wealthy Americans. Student groups provided some visual aids, as about 10 students stood in the back of the hearing room wearing T-shirts with bright red stop signs on them that said "Stop the Raid on Student Aid" (for some reason, they never appeared on the committee cameras that aired the event on the Web, which usually scan the room for audience shots). 

"This is Robin Hood in reverse," said Rep. Dale A. Kildee (D-Mich.), asking students from low-income families to pay for "tax cuts for millionaires." Kildee also said that as a former seminary student, he believed that the budget process Congress is currently engaged in should be called something other than "reconciliation." "Reconciliation is an act of love, and I cannot call this an act of love," he said. "We've got to get a better word."

"We need to take this last clear chance not to try to balance the budget on the backs of students," said Rep. John Barrow of Georgia. "No matter how it's dressed up, no matter how you prepare the charts, what we're doing today is a cut in student financial aid," said Rep. David Wu of Oregon. "The money we're here to cut today is going to go somewhere else, and those funds will never come back to education."

Boehner, whose comments occasionally drip with sarcasm but who almost always keeps his cool, showed a bit of frustration as he insisted repeatedly that the legislation is good for students, noting that it would increase the amounts that students can borrow in their first and second years of college, for example. He emphasized that the vast majority of the $15 billion that the panel seeks to cut over five years will derive from reduced subsidies to and increased payments by banks, guarantors and other parties in the guaranteed student loan program. 

"Students do just fine under the proposal," the chairman said. "The lenders out there, they're bleeding. If they weren't all bandaged up, they'd be bleeding all over the floor." 

As for Democratic statements that the committee's bill is "cutting student aid," he said, "it's just not true, in any way, shape or form." Show me the ways this would cut funds for students, Boehner challenged the Democrats.

Led by Rep. George Miller of California, the senior Democrat on the panel, lawmakers did just that. They responded by listing various provisions in the bill that they said would take money directly out of students' (or parents') pockets: an increase to 3 percent from the current 1.5 percent in the fees that students pay when they first take out a loan (which Boehner noted would drop to 1 percent by 2010 under the legislation), for instance, and a requirement that guarantee agencies charge students a 1 percent "insurance" fee to protect against loan defaults. "These are significant increases, and they are in your bill," said Miller. "Students and their families are going to be paying more than they are under current law."

Rep. Robert E. Andrews (D-N.J.) also said that the increased costs financial institutions would be asked to bear under the legislation would, in some way, eventually be passed on to students, too. "They are going to pay it one way or the other," he said.

Democrats offered a half-dozen amendments aimed at removing certain elements of the Republican plan or, in the case of a proposal by Miller, substituting a wholesale alternative that would use billions of dollars produced through increased fees and reduced subsidies for lenders to raise the maximum Pell Grant to $5,100 by 2010 (the companion bill, H.R. 609, that the education committee passed in July to extend the Higher Education Act would raise the Pell maximum to $4,100, up $50 from the current $4,050).

But all of those amendments were easily rebuffed by the Republican majority. The only amendment that passed, on a voice vote, would require the Education Department to work with the National Academy of Sciences to produce a "scientifically valid" study on the quality of distance education programs. 

The committee-passed bill is expected to become part of a larger budget reconciliation measure that House leaders are preparing. Among the many pending questions is how the House will square its budget package and its separate Higher Education Act bill with a proposal moving through the Senate that would fold its version of the Higher Education Act renewal into the budget reconciliation measure. On Wednesday, the Senate Budget Committee gave its blessing to that legislation produced by the Senate Committee on Health, Education, Labor and Pensions.

The House could be pressured into adding the Higher Ed Act bill into budget reconciliation, or the Senate could be forced to drop the reauthorization legislation from its budget bill. Passage of the Higher Education Act this year is likelier if the legislation remains attached to the budget bill, which must be enacted this year, but budget reconciliation bills are much more difficult to amend than other types of legislation, giving college officials little hope of altering the parts of the Higher Education Act bills that they don't like.


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