A Nice Reform ‘Two-Fer’ For Young Americans — If A Few Senate Dems Don’t Stand In The Way

Young Americans — the so-called “Millennial Generation” — should, in particular, have something to celebrate if the Senate approves the reconciliation bill now up for debate.

That’s because the legislation pairs “corrections” to healthcare reform with sweeping changes to student-aid that are also on President Obama’s agenda. The whole thing, though, could be in trouble not because of Republicans, but because of a small group of Democratic senators who oppose the aid reform provisions.

“Young people are one of the most uninsured groups in America and this bill, if passed, would extend insurance to 10 million members of the millennial generation that are currently uninsured. And, of course, the younger people are also struggling with the costs of college, struggling with student debt and we have to do something to solve that problem,” says Pedro de la Torre with the Center for American Progress, a progressive Washington think tank.

The healthcare legislation Obama signed into law Tuesday, in reality, is not intended to be the entirety of reform. The version of reform Obama signed during a celebratory signing ceremony at the White House actually is the more-conservative version of reform approved by the Senate. House Democrats agreed to approve that bill only on the condition that the Senate OK a series of changes that bring reform more into line with their version.

The House also approved a bill with those changes during its historic vote Sunday, alongside the legislation Democrats passed and sent to Obama, and it was onto that legislation that the the Student Aid and Financial Responsibility Act (SAFRA) was tacked. The legislation has now moved to the Senate, which also must approve this package separately.

This bill is being considered under Senate rules known as “reconciliation,” because those rules protect it from being blocked by a Republican filibuster. Such an unconventional approach was prompted by the surprise Jan. 19 victory of Republican Sen. Scott Brown of Massachusetts. Brown took the seat once held by the late Democratic Sen. Ted Kennedy, and gave the GOP the vote it needed to sustain filibusters. A reconciliation bill needs just a simply majority — 51 votes — to pass.

” … Because of some of the rules about reconciliation … you actually have to include the student aid bill with the health bill,” de la Torre says in a new web video that attempts to explain the unique legislative scenario.

The student-aid reform measures would effectively end the federal Family Education Loan Program, in which private banks and other student loan companies are subsidized by the federal government and are able to get loan guarantees against defaults from the federal government to provide loans to students in favor of a direct-loan program in which the government gives college loans directly to students.

“The student aid system right now first of all doesn’t provide enough help for students,” de la Torre says. “The maximum Pell grant has dropped from covering about three-fourths of an average college education to covering only about one-third since the grant was created. College costs are rising and student aid has not kept up. But really the most pressing reason why we really need to pass Student Aid and Fiscal Responsibility act is because if it does not pass, any existing shortfall in the Pell grant program that was created when students flooded into colleges during the recession and a lot more people had financial need during the recession, this shortfall if not filled in one way or another will cause half a million students to lose their grants completely and cause everyone else in the program–about 8 million students–to get their grants cut by 60 percent.

“This is really unacceptable. We cannot let that happen,” he adds. “And if Congress does not pass the Student Aid and Fiscal Responsibility Act, they’ll either be forced to find this money in couch cushions or cut some other programs to the bone, or they’ll have to use deficit spending to make it up. So this is clearly the fiscal responsible way to go.”

The student-aid reform also will save taxpayers at least $67 billion, de la Torre says, “and that’s actually kind of low because schools have already been moving to this … direct loan program.”

Although the reconciliation bill is protected from a filibuster, Republicans are looking at other ways to potentially derail it.

Senate Majority Leader Harry Reid (D-Nev.) says he has a “commitment of a significant majority of the U.S. Senate” to approve the reconciliation bill.

The Gang of Six

But six of his members earlier this month sent Reid a letter expressing “concern” over the student-aid reform, seeking alternatives.

One of those, the conservative Sen. Ben Nelson of Nebraska, already has gone further, saying he will oppose the reconciliation bill over the student-aid reform. Nelson says student-aid reform has “never been debated in the Senate and would result in a government takeover of student lending.”

Nelson also complains that the reconciliation bill calls for taking $9 billion from the student loan programs to pay for health care.

“That, then, reduces money available to students for college loans by $9 billion,” he says.

With Republicans united in opposition and six Democratic senators expressing doubts, the financial lobby could have a big impact on the upcoming Senate vote, according to Campaign for America’s Future, a Washington progressive advocacy organization.

“Just as health care reform mobilized fierce industry resistance, student loan reform has triggered a massive lobby campaign by the banking lobby,” says Robert Borosage, co-director of the organization. “Now, ironically, the lobby is claiming that Democrats are taking money from students to help pay for health care, when in fact the bill takes money from unjustifiable banking subsidies and helps families pay for college education. Senators should understand that their votes on this matter will be watched just as closely as their votes on health care.”

Campaign for America’s Future released a new report that says former staffers to the six senators who signed the letter to Reid are currently lobbying for the student loan industry: Kelly Bingel (former chief of staff to Sen. Blanche Lincoln of Arkansas); Bill Leighty (former chief of staff to Sen. Mark Warner of Virginia); Amy Tejral (former legislative director for Nelson); Oscar Ramirez (gubernatorial campaign staffer for Warner); Timothy Casey (legislative aide to Sen. Tom Carper of Delaware); and Paul Brathwaite (Carper staffer).

With billions in profits on the line, banks have waged an intensive, multimillion-dollar political and lobbying campaign to maintain the status quo: subsidies for the banks,

Leading student lender Sallie Mae reported profits of $324 million last year on the strength of its student loan business, which is heavily subsidized through the federal government, Campaign for America’s Future says. Sallie Mae originated $21 billion worth of loans backed by the program in 2009; other major lenders profiting from the program include Citigroup, Nelnet, JP Morgan, and Wells Fargo.

The nonpartisan Congressional Budget Office estimates that the $68 billion the government would save with reform would be money that would otherwise subsidize bank profits, Campaign for America’s Future says. CBO also estimates that students would pay significantly lower interest rates on their loans with reform, the advocacy group adds.

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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