Senate Passes Budget Bill -- But...

A chaotic and combustible day in the U.S. Senate failed to fully resolve the fate of a series of bills crucially important to higher education. But Congress did seem headed toward ultimately passing the measures, which college officials and lobbyists generally dislike.

For higher education groups, the lack of finality produced by the day's dramatic events -- which included Vice President Dick Cheney breaking a tie on a budget bill that would cut $12.6 billion from the student loan programs -- was better than the alternative. But it seemed a long shot that Wednesday's happenings would significantly alter the eventual outcome as Congress seeks to wrap up its work for the year.

The most significant activity Wednesday surrounded a "budget reconciliation" measure aimed at cutting about $40 billion from the federal government's mandatory spending programs, with the goal of producing savings to put toward reducing the federal deficit and lowering taxes. 

Higher education associations had vigorously urged the Senate to reject the budget cutting bill (S. 1932) that the House of Representatives narrowly adopted in the wee hours of Monday morning, just hours after the compromise version of the measure had appeared.

The college groups dislike much about the measure, which has been infused with a significant amount of higher education policy making by incorporating elements of legislation that Congress has been considering to extend the Higher Education Act. (In fact, the budget bill contains so much of what might have been in a Congressional extension of the higher education law that college lobbyists now openly say there may be no reason for Congress to finish work on the reauthorization next year -- and no reason for college officials to encourage them to.)

What college lobbyists object to most strenuously in the budget reconciliation bill is the fact that it would derive nearly a third of its savings from the student loan programs. Most of that would come from returning to the government money that now goes to lenders when students and families pay a higher interest rate than the one lenders are guaranteed to receive.

College leaders also complain that the budget cutting bill would turn about $900 million that the Education Department spends each year to administer the two federal student loan programs from a mandatory budget category into a "discretionary" one, which means that Congress would have to vote each year to provide sufficient funds.

That would put the "458 account," as it is called, into annual competition with the other education programs, potentially resulting in less money for student aid in tight budget years. (On the plus side, the budget bill would provide $3.75 billion over five years to create a new two-part grant program aimed at increasing the number of low-income students in scientific and technology fields.)

The measure would also save and raise money through a variety of other means, including by:

• Raising the interest rate on federal loans for parents to 8.5 percent from 7.9 percent (the measure would also allow graduate students to take out such loans for the first time).
• Further restricting and eventually phasing out the practice by which some lenders have charged a 9.5 percent interest rate on loans financed by tax-exempt bonds.
• Requiring borrowers with guaranteed student loans to pay a 1 percent fee to guarantors.

Five Republicans joined the 44 Democrats and the Senate's one independent in opposing the budget measure, citing a range of objections, including the cuts to student loans. But under Senate rules, the vice president breaks deadlocks, and Cheney cut short a trip to the Middle East to cast the deciding Yea vote, 51-50. 

That did not settle the matter, though, because of a parliamentary procedure in which Democrats succeeded in raising a "point of order" that essentially stripped the bill of three provisions. Because the version of the bill passed by the Senate differs from the one that the House approved Monday, the measure will not go to President Bush until the House passes it again -- and its members had left town for the holidays, planning not to return until next year. Republican Congressional leaders were trying to get enough members to return to Washington Thursday to pass the budget bill yet again.

Most college lobbyists thought it was unlikely that the delay provided a chance to get the House to reconsider its vote. But Luke Swarthout, higher education associate for the State Public Interest Research Groups Higher Education Project, said he believed at least a few House supporters of higher education might be persuaded that the bill they had voted for on the fly before dawn Monday was deeply flawed. "It's a different ballgame now that the thing is in play," he said. "We don't think the fight is over."

The other major action in the Senate Wednesday -- the initial defeat of a Pentagon spending bill because Republican leaders had tried to attach to it a highly controversial provision to allow drilling for oil in the Arctic National Wildlife Refuge -- wound up having little practical effect for higher education, because the spending bill wound up passing late Wednesday night after Republican leaders agreed to drop the provision on oil drilling.

Besides funds in the bill for defense research, which is of interest to a subset of higher education, the Pentagon bill also mattered to college officials because lawmakers had also attached to it a $29 billion package of funds for Katrina relief, which included $200 million in support for colleges in Louisiana and Mississippi. Less pleasantly for colleges, the Defense Department measure also includes a provision that would cut 1 percent across the board from spending for all federal programs except for veterans' benefits.

Among the measures that would be affected by the 1 percent cut is the compromise version of the 2006 appropriations measure to provide funds for the Departments of Labor, Health and Human Services and Education, which the Senate passed on a voice vote late Wednesday night. The legislation, which now goes to President Bush for his signature, would keep the maximum Pell Grant at $4,050 but would, after the 1-percent cut called for by the provision in the Defense Department spending bill, result in a reduction in spending on biomedical research at the National Institutes of Health. A chart showing how some key financial aid programs would fare after the 1 percent cut is available from the National Association of Student Financial Aid Administrators.

Also late Wednesday, word came that lawmakers had reached an agreement to extend the USA Patriot Act, which is due to expire December 31, for six months, while the bill's supporters and critics can continue to seek an appropriate balance between security concerns and civil liberty protections.

UPDATE, December 22, 4:30 p.m.: The U.S. House of Representatives approved a one-month extension of the Patriot Act instead of the six-month extension agreed to by the Senate.

To the extent that there are further developments in Congress this week, we'll update Inside Higher Ed, so please check back.