Harkin committed to reforming student loans

In his latest e-mail blast to constituents, Senator Tom Harkin touches on his priorities as the new chairman of the Senate Committee on Health, Education, Labor and Pensions. One point he mentioned hasn’t been on my radar screen this year:

The full agenda of the Committee will focus on reforming federal student loan programs so that we can stop subsidizing private banks and instead focus on loans that the federal government can make more cheaply.  We can save $87 billion over 10 years in that effort, and use that money to increase Pell grants for low- and middle- income college bound students, and to fund other important education initiatives.  

I had forgotten about President Barack Obama’s effort to reform the student loan system:

His plan is to do away with a system in which the Federal Government subsidizes banks and other private finance companies like Sallie Mae to lend money to students. The Administration essentially wants to cut such companies out of the game and run the system itself. Democrats claim the move will save $87 billion over 10 years, which can be used for a laundry list of education priorities, including increasing the maximum amount of Pell Grants, expanding Perkins Loans and investing in community colleges and other programs. […]

Educational institutions currently have two ways to offer federal loans to students. In the Federal Family Education Loan (FFEL, pronounced “fell”) program, the government pays subsidies to banks and lenders to dole out money to borrowers and reimburses companies up to 97% of the cost of any loan that is not paid back. The second way is the direct-loan program, created in 1993 as an alternate option, in which the government cuts out the middle man, lends money directly and gets all the profits. If the Student Aid and Fiscal Responsibility Act (SAFRA) passes both houses of Congress, the approximately 4,500 colleges and universities that are currently signed up for FFEL will have to abandon the program and start using the direct-loan option by July 1, 2010.

Directing federal money toward programs that help needy students, such as Pell Grants, makes a lot more sense than subsidizing private banks to make student loans.

Finding 60 votes in the Senate for this proposal will be challenging, however. This is one banking bailout Republicans will fight hard to protect, and according to Time magazine, at least one Democrat (Ben Nelson of Nebraska) opposes the plan too. If this bill passes, it will probably be through the budget reconciliation process, which requires only 51 votes in the Senate.

Health care reform is sure to take up a lot of Harkin’s time this fall, but I’m glad the HELP chairman will also focus on other bills that could change many lives for the better. Even if the health care project falls apart in the Senate, Harkin could accomplish a lot this year if he gets the student loan bill through and brokers a good compromise on the Employee Free Choice Act.

I see only one downside to Harkin becoming the HELP chairman, and that’s Senator Blanche Lincoln of Arkansas taking over the Agriculture Committee. Jill Richardson has been on this case at La Vida Locavore. I recommend reading her posts on industry lobbyists who used to work for Lincoln, Lincoln’s strong support for corporate ag interests such as Arkansas-based Tyson Foods, and Lincoln’s positions on trade, the climate change bill, and the Clean Water Act.

  • Go, Senator Harkin!

    Speaking as a first-generation college graduate with seven siblings who all completed post-secondary education programs thanks to Pell Grants, Perkins loans and the SELF loan program (as it existed in the 1980s-early 90s), I can’t applaud strongly enough efforts to strengthen access to financial aid for low and middle income families.  My parents paid the interest on our loans until we graduated (which was a financial stretch for them…making tuition payments would have made school completely out of reach for us), and we took over the primary balance and interest payments upon getting our first "real" jobs.  I hope Harkin is successful in this endeavor.  

    • Pell Grants need to be increased

      They don’t cover as large a proportion of higher education expenses as they used to:

      Pell Grants are an important and popular program — Democrats made increasing the grant part of their winning Six in ‘06 platform to take back the House five years ago — but it is critical to recognize just how small the grant is compared to the need. Today, the average tuition for a public four-year college is $6,585, and for a private institution it rises to $25,143. That doesn’t include the price of books or room and board. When the program began the maximum grant covered 72 percent of the average public tuition and 35 percent of the average private tuition; today it covers 65 percent and 17 percent, respectively — and that’s the maximum grant, not the average. Keep in mind as well that one of the first targets for state legislators looking to trim their budgets in these, say it with me, trying economic times will be their state’s universities, which could lead to tuition increases.

      • Gads - don't I know it.

        My oldest siblings paid for most of their educations with their Pell Grants and university work study programs.  By the time I was in college, I think I got about $900/year for a grant, and I paid for the rest of my tuition, books, and boarding with loans and the money I made over the summer.  I was lucky to have parents who were willing to fill in the gaps and cover those loan interest payments until I graduated, or I wouldn’t have been able to finish my degree.  And that’s back when a public university education cost about $6,000/year.

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