A new deal stuck by Democratic Congressional leaders on Thursday will combine student loans and health care into one legislation, which would allow for both measure to be passed by the Senate on a simple majority vote. Without this deal, the student loan bill would have been unlikely passed because it lacked the 60 votes needed to overcome a filibuster. The bill will allow the government to directly loan to students, ending government payments to private student lenders. It will also expand the Pell grant system. About 8 million of the nations lowest-income students receive Pell grants each year. The maximum Pell grant is set to rise to $5,550 for the 2010-2011 school year and will automatically increase every year according to inflation. Private banks are largely against the bill because it would cut off a longtime stream of revenue.
House Democrats packaged student loans and health care into an expedited budget reconciliation bill to get the votes they needed on health care because the financial aid bill is popular. Senate Democrats control 59 of the votes and only need 50 to approve the bill becuase VP Joe Biden would break the tie. Some Senate Democrats tried to resist packaging student loans with health care, but if Congress does not act soon, millions of students may see their Pell grants cut by 60%.
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I think eliminating payments to private lenders is smart, especially because $67 billion can be saved by direclty loaning to students instead of going through a private lender. But even with the $67 billion, an increase in students attending college and seeking aid and the weak economy will raise the cost of new Pell grants from $40 billion to $54 billion. Packaging the student loan bill with health care was a good idea because on its own it might collapse.
Friday, March 12, 2010
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This is a very tactical move from the Democrats. Ultimately, I feel like this is a very important move. Many people who take out college loans end up taking decades to pay them off completely, making them very burdensome. Furthermore, in these economic times, both private and public colleges are seeing increases in their tuition. By avoiding the private banks and making loans cheaper, could mean positive things for future and current students. However, this does cut off revenue for banks, which do a great deal supporting our economy. Banks provide loans for people starting businesses, buying homes, etc. and cutting off their revenue can have some dire consequences. But I feel like supporting student loans will lead to a greater increase of students seeking higher education, which increases their ability to improve the economy, outweighing the effects to banks.
-Michael C.
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