“‘In the middle of this economic chaos,’ [Miller] said, ‘this president knows we can’t compete in a world economy unless we modernize some of our basic systems.’”

…

“Creating a new standard educational model should incorporate the way that young people share information, he said.

“‘All of you create a huge amount of content every day, you teach your peers how to use that new phone, that new program,’ he said. ‘How do we call on people to participate in the educational process who are your peers?’”

“‘About half the people that show up for community college, they don’t show up for the second year,’ Miller said. ‘They don’t get the certificate they’re after, they don’t get the career opportunity, they don’t get the academic degree they were after and they may end up in debt.’

“Miller spoke in detail about recent reforms to the student loan industry. Subsidies worth $60 billion will be diverted over ten years from banks, which manage loans, to students in the form of grants and federal loans.

“The new law, he explained, also rewards those pursuing public service jobs. ‘If you get in the public health and education sectors, after ten years your loans go away,’ he said, ‘because you’re giving something back.’”

“An increasing number of students locally and nationally have been receiving financial aid through the Federal Pell Grant Program.

“In Clark County, the recipients of the need-based grant increased more than 5,500 students between academic year 2008-2009 and 2009-2010, according to statistics from the U.S. Department of Education. In the same time period, the grant disbursement increased by $26.9 million.”

“According to recent figures issued by the U.S. House Committee on Education and Labor, the number of Pell Grant recipients in North Carolina's 4th Congressional District rose 35 percent last year. The district, which includes all of Durham and Orange counties and parts of Wake and Chatham, had 27,471 students who qualified for the aid during the 2009-10 academic year, an increase of 7,145 over the year before.”

…

“Adding to the increase is that under a new student-loan bill signed by President Barack Obama in March, the Pell's Grant's eligibility criteria have changed, and that's made it a little easier to qualify than in the past, Ort and Rome both said.

“Equally important is that the Pell Grant is now authorized for summer school, for the first time.”

“Not since the explosive years of the civil rights movement and the hard-fought debut of government-supported health care for the elderly and poor have so many big things -- love them or hate them -- been done so quickly.

“Gridlock? It may feel that way. But that's not the story of the 111th Congress -- not the story history will remember.”

“In order to restore America's economic competitiveness and prosperity, the Obama administration has set a goal of once again having the highest proportion of college graduates in the world by the year 2020 -- 10 short years away. Community colleges are central to this effort, and the president has specifically called on community colleges to help an additional 5 million Americans earn degrees and certificates in that time. Our challenge is to help these institutions meet the pressing education and job training needs of millions of students working to achieve the American dream. Students just like the ones in my classroom, whose lives are changed by the confidence and opportunity they gain from a quality education.”

…

“In the coming months, we will announce the first $500 million of a $2 billion, four-year investment in community colleges authorized by Congress and signed into law on March 30. This federal investment will support new state-of-the-art education, training and skills development programs to help out-of-work Americans re-enter the job market with increased knowledge and more marketable skills. The funds will enable community colleges to work with universities, business, government and unions to develop career pathways leading to more college graduates ready for the workforce as our economy recovers. In addition, through the American Recovery and Reinvestment Act, the Obama administration has invested billions of dollars specifically in community colleges.”

“An estimated 70,000 UC undergraduates are receiving federal Pell grants, which typically are awarded to students with family incomes below $50,000. According to the report, that is the largest number in UC history and represents 39% of its undergraduates, up from 35% last year.”

“‘I'm from a low-income family and this makes me want to go to college even more,’ said Grant High junior Alana Gerasimchuk. ‘It makes me confident that I can go to UC Berkeley.’

“Former Grant High student CrystalKay Fairrington said it's important for kids in Del Paso Heights and other communities to know there are opportunities out there. Fairrington, who also spoke at the pep rally, attends UC Berkeley.

‘Students think it's beyond their reach, and it's not,” she said.” 

With students returning to college across the nation, many of them are facing rising costs of tuition and books. The Daily Collegian of Penn State reports today on changes to federal students loans that make higher education more accessible and affordable for students.

Katrina Wehr writes:

The law, which was included in the health care reconciliation bill passed in March, simplifies the student loan process, therefore preventing students from accumulating unmanageable debt after graduation, Miller said.

"No one should have to mortgage their future to go to college," Miller said. "That's just unacceptable."

In an effort to meet President Barack Obama's goal of producing the most college graduates in the nation's history by the year 2020, SAFRA introduced an increase in funding for Pell Grants -- as the Consumer Price Index's cost of living increases, so will the monetary value of the grants.

He said the law also lowers caps on monthly loan repayments.

Beginning in 2014, borrowers who qualify for income-based repayment on their loans will be able to cap their payments at 10 percent of their monthly income, Miller said. Prior to the switch, the cap was 15 percent, Miller said.

1. 4.25%
2. 4.5%
3. 5.5%
4. 6.25%

“We’ve taken important steps to ensure the stability of the student loan programs, to make college more affordable and help families and students manage their student loan debt.

“First, we increased the efficiency of the loan program so that we have more to invest in our students, and we increased the reliability of the programs so that students and families are never again left wondering where to turn in a difficult economy.

“Earlier this year, as part of the historic health care legislation, we made the single largest investment in federal student aid ever and transformed the way student loans programs operate.

“With President Obama’s direction we made the common-sense decision to stop wasting taxpayer money on subsidies to big banks and instead use that money to invest directly in students.

“By making the switch to direct lending, we saved $61 million that we gave directly back to the student. We raised the Pell grant scholarship, we made it easier for borrowers to repay their loans, regardless of their income, and we invested in community colleges and historically black colleges and universities. Most significantly, we made all of these investments in students and our economic future at no cost to taxpayers.

“Second, too often recent graduates look beyond careers in public service because they worry they will not be able to afford to pay back their loans. Recognizing this struggle, we made it easier for students to consider careers in public service.

“Under a program passed in 2007 as part of sweeping college affordability legislation, college graduates who enter into public service careers, such as teachers, public defenders and prosecutors, are eligible for complete loan forgiveness after 10 years of qualifying public service and loan payments. At a time when Americans’ interest in public service jobs is surging, this program is especially helpful.

“Third, we instituted a means for students to repay their loans that caps borrowers’ monthly loan payments at just 15% of their discretionary income. After 25 years in the program, borrowers’ debts will be completely forgiven.”

“Take, for example, a recent graduate with $30,000 in federal student loans and a starting salary of $25,000. Under this repayment program, this borrower’s monthly loan payment would be $110--one-third of the $345 monthly payment under a standard plan.

“Starting in 2014 new borrowers who are eligible for this repayment program will be able to cap their monthly loan payments at just 10% of their discretionary income. Borrowers who responsibly make their monthly payments will see their remaining balance forgiven after 20 years of repayment.”

The Wall Street Journal writes today about the new rules for student loans. 

Some parents and students may also see lower interest rates on new loans. Now that all Parent PLUS loans are under the Direct Loan Program, the fixed rate for new Parent PLUS loans is 7.9%. Some lenders had charged 8.5%.

And the fixed rate has dropped, to 4.5% from 5.6%, for new subsidized Stafford loans for undergraduates. With subsidized loans, the federal government pays the interest on a loan while the student is in school, during the grace period after graduation or if the loan is in deferment, which is when borrowers are temporarily allowed to stop making payments.

The Department of Education also has increased the maximum Federal Pell Grant award to $5,550 for the 2010-2011 academic year, from $5,350 for the 2009-2010 school year.

As Investopedia pointed out, the reforms eliminate the middleman, enlarge Pell Grants, increase funding for minority-serving institutions, lower income-based payments, and offer more forgiveness opportunities.

Learn more about how reforms to federal student loans help students, families and taxpayers.

But before you even think about a private loan, make sure you have maxed out on your federal student loans. Federal student loans have fixed interest rates and more flexible repayment terms than private loans. If you have trouble making payments after you graduate, the federal government offers several programs that provide relief (more on this later). Private lenders aren't required to do anything to help troubled borrowers.

All PLUS loans (Parent Loan for Undergraduate Students) are now issued through the Direct Loan program. Like Stafford loans, these loans were previously offered by private lenders, as well as through the Direct Loan program. The rate for Direct PLUS Loans is 7.9% vs. 8.5% for FFEL PLUS Loans. Parents can use PLUS loans to pay for any college costs that aren't covered through Stafford loans and financial aid. Graduate students are also eligible to borrow through the PLUS program.

Rates for subsidized Stafford loans, which are available to borrowers who demonstrate economic need, fell to 4.5% from 5.6%. This new rate will apply only to subsidized Stafford loans issued between July 1, 2010, and June 30, 2011, says Robert Murray, spokesman for USA Funds, a non-profit company that services loans. Rates on subsidized loans issued before July 1 won't change, he says. The rate for unsubsidized Stafford loans, which are available to all students, remains at 6.8%.

Origination fees for Direct Stafford loans dropped to 1% from 1.5% on July 1. Because the cost of the fee is deducted from the proceeds of the loan, the reduction will increase the amount of money available to pay your college costs, Murray says.

Other changes that took effect July 1 could provide relief for graduates who aren't making enough money to afford their loan payments.

The income-based repayment program allows federal student loan borrowers to have their loan payments reduced, based on income and family size. For most eligible borrowers, loan payments will be less than 10% of their income. Two updates to the program could lower payments even more for some borrowers:

Married couples will no longer be penalized. Previously, when couples filed a joint tax return, the program assumed that both spouses could use 100% of their combined income to make loan payments. In cases in which both spouses had student loans, the minimum payments were much higher than the minimum for unmarried borrowers with the same debt and income, says Lauren Asher, president of the Institute for College Access and Success. The new formula will take into account married couples' combined income and their combined debt to calculate minimum payments, Asher says.

Eligibility for income-based repayment will be based on the balance when the loan went into repayment or the current loan amount, whichever is greater. This will primarily benefit borrowers who have gone into forbearance or deferment, Asher says. These programs allow borrowers to temporarily suspend payments, but if interest accrues during the period, they end up with a larger loan balance.

• Invest the bill’s savings to make college affordable and help more Americans graduate
• Provide reliable, affordable, high-quality Federal student loans for all families
• Meet Pay-As-You-Go fiscally responsible principles and reduce the deficit

"We now have the opportunity to really take that rigid system and make a trade-in, if you will, of some additional flexibility at the local level for outcomes, for results. The Secretary [of Education] has made that clear, the President has made that clear, and I think we've made that clear in the series of hearings that we have held. We'd really like now to put more emphasis on better teachers, more emphasis on better leadership, more emphasis on the use of those resources and the flexible use of those resources, and really put teaching and learning and leadership back into the classroom, back into the local systems, and then stand back and hold them accountable for those--for those results, and we're getting a lot of encouragement as we've held our hearings."

"And what we tried to address ... was to see whether or not we could bring down the cost of college for families with an increase in the Pell Grant, by lowering the interest rates on student loans over the next couple of years, and then make it easier for the students and the families to manage that debt that they're required to take out to get the degree that they desire. And one of the ways we do that is we have--we let them have an income determinant payment system. How much you pay every month depends upon how much you're making. So, if you start a career with a low entry wage, you can still have that career and you can manage your payments.

"If you go into public service or you work for a non-profit, if you want to become a nurse, a doctor, a teacher, a prosecutor, a public defender and you're working for a public agency, in ten years, your loans go away, and you never have to pay more than 10--10 percent of your discretionary income to pay that loan back. All of a sudden, people can envision careers that otherwise they couldn't have, where they may really wanted to be a teacher, to be a health nurse, to be a physician's assistant, but they couldn't see how they could balance the pay and the education. We need those people, and so this is really in the public interest.

"We also--when we moved to the direct loan programs, it required the companies bring jobs back to America because they're now managing federal assets when they manage the repayment of these loans, and that requires people--that it be done here in America."

"There is--clearly, whether you're a Democrat or a Republican, you have a big interest in children. It's about our children, our neighbor's children, our constituents' children, it's about the country, and that passion is on both sides of the aisle, certainly in our Committee."

"The envelope arrives with good news. The college is pleased to announce that the student has been offered acceptance and, if he or she is fortunate, some scholarship money.

"But in this busted economy, more parents are saying they need more money and are filing appeals. Then the waiting starts again, for a phone call.

"The job of delivering that news — after weighing hopes and dreams against limited budgets — falls to people like Sandra J. Oliveira, the executive director of the financial aid office at Providence College."

"'With the change in circumstance, they may get another $1,000, $2,000 in grant,' she said, using shorthand for a direct scholarship, as opposed to loans. Moreover, the precipitous drop in income will most likely qualify the family for a federal Pell grant, perhaps as much as $5,550."

"This was not a decision I made lightly," [Valisha Cooks] said. "Filing for bankruptcy was expensive and, most of all, humiliating. I was raised to work hard, pay my bills and be responsible." About $10,000 in other debt was erased. But not her student loans.

"Now, even though I have a good job, I can't afford to pay all my bills in any one month," Cooks told the [House Judiciary] subcommittee. "I go to food banks to feed my son, and I will never be able to afford a house." Like child support and tax debt, student loans are nearly impossible to eliminate in bankruptcy. You have to prove "undue hardship." That's a high hurdle to jump.

Before, the only loans that couldn't be canceled by filing for bankruptcy were federally backed student loans, as well as loans where nearly all the funds came from a nonprofit institution, according the National Association of Student Financial Aid Administrators. In the case of the federal loans, this made sense. The government backs the loans, and defaults are a direct hit to the federal budget, meaning we all pay for those who can't.

But in 2005, during a major overhaul of the bankruptcy code, private student loans were given an elevated status and thus couldn't be discharged. This didn't make sense. If we are going to have a fair bankruptcy system, private education loans should be treated the same as other private consumer debt. That's the risk lenders take, similar to the risk borne by providers of loans for cars, homes or other consumer purchases.

Lenders and opponents of this legislation argue that if people can erase their education debt, private loans for college will be tougher to qualify for and harder to get. There's a concern that people will get an education and immediately run to bankruptcy court to shed their loan obligations before they make big money.

I covered bankruptcy for years, and seldom did I see bankruptcy petitioners gleefully sitting in the corridors of a courthouse eagerly waiting to shirk their financial responsibility. People usually seek bankruptcy protection as a last resort. Besides, there is a test in place to prevent people from scamming the system.

1. Elimination of the Middleman
2. Larger Pell Grants
3. Increased Funding for Minority-Serving Institutions
4. Lower Income-Based Payments
5. More Forgiveness Opportunities

The Bottom Line
While cash-strapped college students (and their parents) will likely welcome anything that helps them manage those hefty tuition payments, many critics say these measures don't go far enough, especially considering several elements don't go into effect for several years. However, when coupled with recent changes to simply the FAFSA (the form students may complete to apply for federal aid) and the expansion of college-related tax credits, the new legislation may at least provide a little bit of a helping hand to families struggling to afford the overwhelming cost of higher education.

The Income Based Repayment option caps student loan payments at 15% of discretionary income (adjusted gross income less 150% of the poverty level based on family size) and remaining balances will be forgiven after 25 years of repayment.  (More information on IBR from the U.S. Department of Education.)

Additionally, those serving in public service or non-profit employment are eligible to have remaining balances forgiven after 10 years of employment in an eligible occupation and repayment.  (More information on the Public Service Loan Forgiveness Program from the U.S. Department of Education.)

The Income Based Repayment option will cap student loan payments at 10% of your discretionary income and remaining balances will be forgiven after 20 years of repayment.

The federal Pell Grant program will get a badly needed financial boost. The Obama administration says the new law pumps more than $40 billion into this program, which provides need-based grants to low-income undergraduates and certain graduate students.

Starting in 2013, the award will be scaled to the consumer price index, adding on a cost-of-living increase. That will raise the maximum from $5,550 to $5,975, according to CBO estimates.

Here's what really excites me. There will be additional funds for community colleges, historically black colleges and other institutions that serve minorities.

Community colleges are expected to get $2 billion over four years. Minority and historically black colleges and universities will get $2.55 billion.

It's about time community colleges got some attention and needed funds. Maybe now, these institutions will shed the reputation that they exist for the academically challenged. Maybe now they won't be seen as the "13th grade," as some people say in discouraging students from this road to higher education.

...

At least if you're stuck with the debt, provisions in the health-care law will lower the cap on monthly payments for some.

Beginning in 2014, student-loan payments under the income-based repayment plan will be capped at no more than 10 percent of a borrower's discretionary income -- the amount of a person's adjusted gross income that exceeds 150 percent of the poverty line for the family size. Payments are capped at 15 percent.

If people keep up their payments, any borrowed amount not paid after 20 years will be forgiven (down from the current 25 years). For public service workers -- teachers, nurses and those in military service -- the debt is forgiven after 10 years.

In many respects, it was quite appropriate to fold higher education provisions into the health-care reform legislation. The financial health of a lot of people has been hurt by the amount of debt they use to get an education.

President Barack Obama signed into law the last piece of his mammoth plan to overhaul health care Tuesday and, with the same pen strokes, achieved a far-reaching change in the way most Americas help pay the cost of a college education.

Both the health care provisions and revamping the loan program for college students were sandwiched into a single piece of legislation — the budget-reconciliation bill approved last week by the House and Senate.

President Obama signed important and welcome changes to the nation's campus loan program. The reforms should save the country billions and give more students a crack at a college degree.

Why it took so long is a minor scandal. Since the 1970s, federal money was doled out to banks to lend to students. In practice, though, the banks collected a healthy fee and fobbed off the bad loans to the government. It was a no-lose deal for these lenders.

But it endured, largely through fierce lobbying from lenders such as Sallie Mae. This year, the dam broke. The Senate and House voted to put Washington in charge of the loans, a shift estimated to save $68 billion over 10 years. That will allow loan limits to rise slightly, expand Pell Grants to defray tuition bills for needy students and invest $2 billion in community colleges.

But the changes didn't come easily, despite the sustained and gallant efforts of Rep. George Miller, D-Martinez.

Pelosi vigorously clapped back at the crowd as camera flashes popped. When Obama later singled Pelosi out, calling her "amazing," the crowd jumped to its feet again. (Rep. George Miller (D-Calif.) got a standing ovation, too).

According to the Congressional Budget Office, the legislation will reduce bank subsidies by $61 billion between 2010 and 2019. A large share of these savings will then be used to boost financial aid for low- and middle-income borrowers.

For example, the legislation increases funding for Pell Grants by $36 billion over the next 10 years. Pell Grants are scholarships to help low- and moderate-income students pay their college costs. Sixty-two percent of dependent Pell Grant recipients come from families with incomes below $30,000 per year. Pell Grants are therefore extremely well-targeted to individuals who will rely on them to increase their spending (for textbooks, tuition, and other expenses) rather than to increase their savings.

Similar to food stamps and unemployment insurance, this spending creates demand for goods and services in local communities, and this in turn helps to create jobs. The key reason for persistently high unemployment in the United States is the lack of demand for goods and services; spending that spurs demand thus creates jobs.

The job-creating effects of the education provisions of the reconciliation legislation will likely outweigh any job loss that could result from eliminating the middlemen in the student loan programs. These reforms are clearly a win-win-win for American workers, students, and taxpayers.

Nearly two-thirds of Americans say they favor a proposal to increase the amount of money available for college loans by allowing the government to provide those loans directly to students, according to a new poll.

A CNN/Opinion Research Corporation survey released Wednesday indicates that 64 percent of respondents favor the proposal and 34 percent opposed it.

...

The survey also indicates, to a degree, some rare bipartisan support, with a vast majority of Democrats, a solid majority of Independents, and a slight majority of Republicans favoring the proposal.

College students swarmed Capitol Hill on Tuesday to plead for more financial aid as private lenders made a last push to preserve their endangered role in making federal student loans.

The dueling messages sought to influence potential Senate action this week on a proposal to expand direct government lending by cutting funding for private firms that make federally guaranteed loans. Tens of billions of dollars in projected savings would flow to grants for needy students.

...

The measure would save an estimated $61 billion over 10 years by cutting out subsidies for private lenders, which the Obama administration describes as needless go-betweens, and by expanding direct government lending. It would provide $36 billion in Pell grants for students from low- and moderate-income families, including $13.5 billion to plug a shortfall this year because rising numbers of students are eligible for aid.

The United States Student Association rallied hundreds of members on Capitol Hill for the bill. They waved signs -- "Students NOT Banks!" and "$ Now!" -- and chanted slogans that underscored the fiscal straits universities face as they raise tuition. "They say, 'Cut back!' " students yelled. "We say, 'Fight back!' "

"I'm an independent student," said Sabrina Ford, 19, of Ypsilanti, Mich., a financial aid recipient in her first year at Eastern Michigan University. "If the Pell grants are cut, I have no idea how I would pay for education. Right now, I rely on myself and the government to assist me."

Lots of Democrats can point to lots of different moments when they think the health care bill was brought back from the brink of collapse.

But for a number of senior House Democrats, the crucial turning point was a meeting the night of March 9 in the offices of Speaker Nancy Pelosi. It was supposed to be a strategy session with Senate Democratic leaders about the budget reconciliation procedure that Democrats were planning to use to make final changes to the health care bill and push them through the Senate on a simple majority vote.

Instead, the session focused entirely on the question of whether to include another of President Obama’s top legislative priorities — a sweeping overhaul of federal student loan programs — in the reconciliation package.

The budget resolution approved by Congress last spring provided for completing both major health care legislation and major education legislation through reconciliation, which adjusts federal policy to meet specific goals for reducing the deficit.

A trio of House leaders — Representatives James E. Clyburn, the Democratic whip; George Miller, the chairman of the Education and Labor Committee; and Xavier Becerra of California, the vice chairman of the Democratic caucus — argued strenuously in favor of including the education proposal.

...

Although overshadowed by the larger health care fight, the inclusion of the education bill may have been a decisive factor, especially at a time when House Democrats were exceedingly distrustful of their Senate colleagues and were essentially being forced against their better judgment to approve the Senate’s health care bill as the base law to which they would later make changes.

The student loan overhaul was very popular in the House. And because it would save tens of billions of taxpayer dollars by ending subsidies to private commercial banks, it offered a purely populist message at a time when public anger at Wall Street is running high and many liberals were disappointed that the health care bill would not include a public option, or government-run insurance plan.

Mr. Clyburn, who as the whip is the party’s main vote-counter, argued forcefully that the student loan measure would help generate support for the health care package.

...

For some Democrats, the student loan plan is the hidden triumph in the health care fight, and the late-night meeting earlier this month was the crucial moment. “It was an fascinating conversation about what the Democratic Party represented,” one Democrat said.

“Members of Congress have a clear choice,” Mr. Miller said in a floor speech on Sunday night. We can side with the American people by making health insurance and college more affordable and accessible, while creating millions of jobs and reducing the deficit. Or we can side with the insurance companies and the banks. That’s it. That’s the choice. I’m siding with the American people.”

Because of the recession and continued high jobless rates, a surge of prospective students are heading to college to gain a competitive advantage in the job market, and an unexpectedly large number of them are applying and qualifying for Pell grant money to help pay for their classes. The U.S. Department of Education says 2.6 million more people have already applied and qualified for Pell grants for fall 2010, compared with academic years before the recession began. Specifically, between fiscal year 2008 and fiscal year 2011, the number of qualified applicants has risen from 6.1 million to 8.7 million.

During a conference call with reporters late Thursday, Education Secretary Arne Duncan stressed that if the direct-student-loan bill fails to pass, there will be no way to span the gap between the money already allocated for Pell grants this fall and the increased demand for financing. The result would be that many qualified applicants would not get the maximum of $5,150 but a whittled-down check averaging $2,150.

The savings from the bill, Duncan said, could help the country “educate our way to a better economy. The downside, if we do nothing, is that as many as 8 million students will see their aid cut by as much as 50 percent. This is a huge, huge opportunity.”

• Eni F. H. Faleomavaega (AS-AL)
  

If Congress makes the right call this week, students and taxpayers will win out.

In the coming days, the House and Senate will take a critical up or down vote on historic health insurance reforms. Tied to them will be the most significant reform of our federal student loan program in a generation. It will make federal aid more effective and cost-efficient for students, families, and taxpayers, without increasing the deficit.

Congress should support both measures.

Our bill is good for taxpayers. It would eliminate these needless subsidies and instead have the government initiate student loans, as it does today, and private banks service them. Consider that the government now funds 88 percent of all federal student loan volume. There's simply no reason to keep giving banks a handout.

Our bill is good for students. The federal government has already proved to be a more reliable lender for students in the midst of economic instability. All of the savings generated from switching to direct lending will go to help students pay for college and reduce our deficit.

Our bill is good for jobs. It would preserve private-sector jobs by allowing banks to compete for loan servicing contracts - and could even bring overseas jobs back home. Unlike loans made by banks, direct government loans must be serviced by U.S. workers.

Students overwhelmingly support the proposal. During the 2009 National Student Congress, student aid reform was unanimously passed as a top legislative priority for the United States Student Association, which represents over 4.5 million college students. Hundreds of student governments have subsequently adopted resolutions supporting the Student Aid and Fiscal Responsibility Act, and hundreds of thousands of students have contributed to a national “wall of student debt” with paper “bricks” exhibiting their personal and financial struggles to pay for college.

First, it's no government takeover. Opponents would make it appear as though Democrats want bureaucrats to destroy a functioning private market for federally backed student loans. In fact, the only reason any private company is in the business of originating such loans is because of government support, and propping up that artificial market is expensive. In the end, it's a better deal for taxpayers to have the government lend money directly to students. Private lenders, who want to preserve some role for themselves in the loan origination business, counter that they provide better services to students. But the government plans to farm out loan servicing to them through a process of competitive contracting.

Second, reconciliation, which removes the filibuster as an option and allows legislation to pass with a simple majority, has been on the record as an option for student loan reform for months. Since there can be only one reconciliation bill per budget year, the Democrats' move to add the education measure to health-care reconciliation should be no surprise. If there is a proposal tailor-made for reconciliation -- a procedure originally intended to help Congress rationalize the budget -- it is this plan to end a wasteful program of subsidies for private lenders.

Democratic Congressional leaders struck a tentative agreement on Thursday that breathes new life into President Obama’s proposed overhaul of federal student loan programs.

The deal would bundle the bill into an expedited budget package along with the Democratic health care legislation, which would allow for both measures to be passed by the Senate on a simple majority vote. Without the deal, the student loan bill would have been unlikely to pass because it lacked the 60 votes needed to overcome a filibuster.

The bill would end government payments to private, commercial student lenders, leaving the government to lend directly to students. It would also redirect billions of dollars to expand the Pell grant program for low-income students, and to pay for other education initiatives.

The op-ed has plenty of scaremongering about Washington takeovers and long lines for student loans, but it doesn’t acknowledge the simple fact that the government already makes millions of loans every year, in a process that does not look anything like waiting in line at the DMV. In fact, under SAFRA, student loan companies will still service and administer the loans, they just won’t take federal money and originate them. That money, instead of going to the compensation, advertising, and overhead of private companies, will be reinvested in Pell Grants and other education initiatives.

In reality, getting a student loan through the Federal Direct Loan Program isn’t going be any different than it is for the millions of students who are already getting loans through the Federal Direct Loan Program, which involves filling out the same forms you use to get loans under the “give-banks-billions-of-free-taxpayer-dollars” program that Alexander is defending.

Alexander also alleges that the administration has been less than forthcoming about what’s really going on here:

Here is what they haven’t told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you’ll work longer to pay off your student loan to help pay for someone else’s education — and to help your U.S. representative’s reelection.

It’s not a secret that the government will be lending money for more than that money costs. All lending programs work this way. The difference is that currently the money left over after paying people to administer the program is used to line the pockets of bank shareholders and executives whereas under Obama’s plan it will be used for Pell grants that benefit low-income students. Alexander’s contention that “you’ll work longer to pay off your student loan to help pay for someone else’s education” ignores the fact that many borrowers also receive Pell grants. Or attend the colleges that will receive grants to improve graduation rates, or have small children who will benefit from new investments in early childhood education. Alexander concedes that most people think such programs are a good idea. Otherwise, they wouldn’t help U.S. representatives get re-elected! He suggests that instead of subsidizing Pell grants, the federal government should use its unique ability to borrow cheaply to lend at extremely low rates, thus undercutting the private market for loans from companies that can’t raise money by issuing Treasury bonds. This, of course, would immediately be denounced as “socialism.”

“Industry Lobbying Imperils Obama Overhaul of Student Loans” (front page, Feb. 5) didn’t tell the whole story. In truth, lenders are fighting to save a system that allows them to reap billions in profits at the expense of students.

President Obama’s proposal would save taxpayers $87 billion — and redirect those funds to students instead of banks. It would make college more affordable without costing taxpayers a dime.

Lenders’ claims about job losses have proved overblown. This legislation would allow lenders to continue servicing all federal loans — ensuring high-quality customer services for borrowers and preserving jobs.

Lenders would compete for these contracts based on the quality of service they offer, including default prevention. In fact, two of the five performance criteria for current direct loan servicers — including Sallie Mae — are tied to default prevention.

It’s not news that lenders don’t like this bill, but college students overwhelmingly do. We can’t let their voices, or the points above, get drowned out by well-heeled lobbyists.

George Miller Washington, Feb. 8, 2010

The writer, a California Democrat, is the chairman of the House Education and Labor Committee and the author of the Student Aid and Fiscal Responsibility Act.

Inside Higher Ed has an article today on the report by the State Higher Education Executive Officers. The report looks at funding levels for universities. It says:

In the 2009 fiscal year, state support for higher education fell by $2.8 billion to $77.9 billion, but an infusion of $2.4 billion in federal funds largely offset those losses.
...
Just as states were seeing revenues decline, the enrollment boom hit a record high of 10.8 million students at public institutions – an uptick of 3.4 percent between 2008 and 2009. In a predictable pattern for a recession, those students have been carrying a greater share of the cost of their education. Indeed, 37.3 percent of education revenue came from tuition in 2009 -- an increase of 2.6 percentage points in five years, the report notes.

Thanks to the backstop in federal funds, universities all over America were able to keep teaching, even with a higher enrollment.

Learn how the American Recovery and Reinvestment helped backstop education funding gaps at local and state levels allowing teachers to stay in the classrooms and students to learn.

Although today's hearing with the Secretary of Education, Arne Duncan, had to be postponed due to a blizzard in the Washington, DC area, that hasn't stopped him from making a persuasive case for passing the Student Aid and Fiscal Responsibility Act.

In the Washington Post:

Education Secretary Arne Duncan on Tuesday urged the Senate to overhaul student lending, asserting that the banking industry has had "a free ride from taxpayers for too long" and that executives with lending giant Sallie Mae have enriched themselves as borrowers rack up college debt.

"Working Americans pay while bankers get rich," Duncan said in a prepared statement. "Sallie Mae executives have paid themselves hundreds of millions of dollars in the last decade while teachers, nurses, and scientists -- the backbone of the new economy -- face crushing debt because of runaway college tuition costs."

In an interview with Huffington Post:

Duncan called the administration's plans to overhaul the student loan program by ending government subsidies for private lenders "a once-in a generation, maybe once-in-a lifetime" opportunity that Congress would be foolish to let slip away.

and in that same article, Chairman Miller said:

"I haven't found one [argument from Sallie Mae's lobbyists] that made sense yet," said Rep. George Miller (D-Calif.), chair of the House Education Committee. "We are now providing 88 percent of all the capital and over the next ten years we can save 85 billion dollars doing it a different way. And that money can be used to enhance the educational opportunities of millions of students in this country. It is a no brainer."

The Student Aid and Fiscal Responsibility Act (H.R. 3221) passed the House with a bipartisan vote of 253 to 171 on September 17, 2009 and is waiting in the Senate.

The House version phases out the wasteful part of the federal college lending program that pays private lenders a rich subsidy to make risk-free loans that are guaranteed by the government. The bill also expands another, more reliable and less expensive federal loan program that permits students to borrow directly from the government through their colleges.

The arguments for moving in this direction are irrefutable. The subsidized program, for example, was supposed to keep loans flowing during recessions. But the loans dried up in the last credit crunch, forcing the government to rescue the program. The direct program, by contrast, suffered no such disruption. In addition to being more reliable, the direct program costs less. The Congressional Budget Office estimated last year that the country could save about $80 billion over the next decade by ending the private system and moving to the direct one.

Outmaneuvered on the merits, the lending industry has resorted to scare tactics and distortions. The claim that the direct system would amount to a government takeover of the system is absurd.

• SAFRA will not lead to significant job losses. While this legislation will trim the profits of CEOs and big banks, it will not lead to significant job losses. By maintaining a servicing role for both large and smaller lenders, this bill will preserve jobs and, unlike in the FFELP program, keep them from being shipped overseas.
  

• The current lending system is broken. The Federal Family Education Loan Program (FFELP) now depends on taxpayer dollars not just for subsidies that reimburse lenders when borrowers default on loans, but also for the capital to finance their lending activity altogether. Taxpayers now fund 6 of every 10 dollars in federal student lending activity. They absorb all the risk. There’s simply no reason to keep pumping taxpayer dollars into a broken system when the federal government can provide the same low-cost federal loans more reliably for students and at a lower cost for taxpayers. Under this bill, this federal program will continue to be a federal program, as it always has been, and private industry will continue to have a role, but one that is more effective and cost-efficient for families and taxpayers.
  

• There would actually be fewer student loan defaults under SAFRA. Recent preliminary data released by the U.S. Department of Education shows that in 2007, default rates were lower in the Direct Loan program than in FFELP. By allowing private lenders to service these loans through a competitive process, which will include default prevention strategies, this bill will ensure that more borrowers can receive service from lenders that have been effective in keeping default rates low.

• Sallie Mae's alternative saves less and puts more money in lenders' pockets, instead of helping students.  Sallie Mae's modified student loan proposal would slash more than $8 billion off of student aid to give lenders a bonus. “You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students,” said Chairman Miller. “The House saw this proposal for what it was and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.”
  

• Students themselves are clamoring for SAFRA.  Most recently, Baylor University's college newspaper The Lariat published a story supportive of SAFRA. 
  

• Colleges are finding it easier than anticipated to switch to the Direct Loan program.  A survey conducted by the National Association of Student Financial Aid Administrators shows that colleges that switched from the federally-guaranteed student loan program to the Direct Loan program in the past year generally found it much easier than they expected. In fact, 96% of student loan volume is ready for direct loans, already
  

Sallie Mae, a publicly traded company that is the nation’s biggest student lender with $22 billion in loans originated last year, led the field in spending $3.48 million in federal lobbying in 2009, an increase from $3.2 million in 2008, and other lenders spent millions of dollars more, according to an analysis prepared for The New York Times by the Center for Responsive Politics.

...

“We anticipated this,” Arne Duncan, the education secretary, said of the lending industry’s lobbying efforts. “They’ve had a sweet deal. They’ve had this phenomenal deal that taxpayers have subsidized, and that’s a hard thing to give up.”

Private lenders get a cut of the federally backed loans that they originate and service, with little risk of their own.

...

“If people want to lose $80 billion on the taxpayer’s dime for the very narrow interests of Sallie Mae, I guess they can decide that, but it makes no economic sense to me,” [Chairman George Miller] said. “They had a great ride for years.”

The proposal would rework the way the federal government judges public schools, scrapping a requirement that states increase the percentage of students meeting standards each year, though it allows states to set their own standards.

In its place, President Obama wants lawmakers to consider rewarding states that show progress toward internationally benchmarked, nationally developed standards.

...

Obama and Arne Duncan, his Education secretary, have long said No Child Left Behind doesn't hold states to high enough standards. On a conference call Monday, Duncan told reporters the law "often does little to reward progress" of schools that help students achieve — and lets states set standards that are too low to allow U.S. children to get into college or compete internationally.

"In too many states, those standards are too low, and the existing law doesn't provide states with incentives to raise their standards," Duncan said. "In fact, quite the opposite is true."

I applaud the President’s continued funding commitment to early education and our K-12 schools. His budget sends the right message about balancing incentives with resources – spurring major school improvements and providing the resources needed to make them. I agree with his focus on rigorous standards, effective teachers and turning around our lowest performing schools. We will examine these and other key areas as we begin working on a bipartisan rewrite of our federal education laws.

The president’s fiscal year 2011 budget, slated to be released Monday, will seek a 6.2 percent increase to the U.S. Department of Education’s budget, including up to $4 billion more for K-12 education. The department’s discretionary budget for fiscal 2010 is roughly $63.7 billion.

A large piece of the increase, $1.35 billion, would be aimed at extending beyond this year the $4 billion in economic-stimulus program Race to the Top grants and opening up the competition—now limited to states—to school districts. The president highlighted the Race to the Top saying it had “broken through the stalemate between left and right,” and pledged to expand the reform priorities of that competition—among them turning around failing schools and increasing the supply of effective teachers—to all 50 states.

“The idea here is simple,” he said. “Instead of rewarding failure, we only reward success. Instead of funding the status quo, we only invest in reform­—reform that raises student achievement, inspires students to excel in math and science, and turns around failing schools that steal the future of too many young Americans, from rural communities to inner cities.”

...

President Obama also called on Congress to pass legislation that would make sweeping changes to the student loan program and redirect money from the projected savings to building new school facilities and bolstering community colleges, early-childhood-education programs, and Pell Grants, which help low-income students pay for college.

“I am especially pleased that President Obama called on Congress to rewrite our nation’s federal education laws. The key to getting this done will be bipartisanship. I plan to begin working on this immediately with this administration, Congressman Kline, our colleagues on the House Education and Labor Committee and all parties that have ideas about how to improve our schools.

“Throughout his speech, President Obama talked about changing the way Washington works. One way we can do just that is by enacting legislation already passed by the House that would invest billions of dollars to help families pay for college – at no cost to taxpayers – by eliminating taxpayer subsidies for student loan middle men. Ending these subsidies will save $87 billion that we can invest directly in our college students and in improving early education and community colleges. It’s a much better use of taxpayer dollars.

Unprecedented growth in student loans over the past two years is raising questions about whether a generation will be saddled with debt before it has even entered the workforce, according to data that the Equifax Inc credit bureau provided exclusively to Reuters.

The number of U.S. student loan accounts has risen 29 percent to 69 million over two years, according to Equifax, while balances have jumped by $105 billion to $527 billion.

"We've never seen this high student loan activity," said Dann Adams, president of Equifax's U.S. Information Systems.

The demand for student loans results from college graduates pursuing advanced degrees because of high unemployment. Also, parents' depleted savings mean more college-age children are forced to take on debt.

Financial concerns, from paying for college to job prospects, dominated the new-student experience in 2009, according to an annual survey on freshman attitudes.

About two-thirds of freshmen said they were either somewhat or very worried about their ability to finance their college educations. Those citing "some" concerns about money increased about two percentage points, to 55.4 percent, while students citing "major" concerns remained at 11.3 percent, about the same as in 2008.

Under the current FFEL program, banks make loans to students. While those students remain in school, the federal government pays the interest on their loans; otherwise the interest accrues. Once the borrowers leave school or graduate, the lending agency collects on the loans. But if the student defaults, my department pays back the loan—plus the interest owed. The FFEL program, in short, is a great deal for bankers but a terrible one for taxpayers.

Here in Oregon, the Legislature has severely cut funding for higher education over the last decade, and the Oregon Opportunity Grant received a reduction of over $10 million. Mitigating economic shortfalls on the backs of students by shifting the cost of college away from the state and onto working families is a shallow solution to a deep financial problem. Instead, the government should be investing in students, ensuring that Oregon helps meet President Barack Obama's goal of having the United States produce more college graduates than any other country by 2020.

The U.S. Congress is doing its part to meet this ambitious aim by passing the Student Aid and Fiscal Responsibility Act, a landmark bill that makes the greatest higher education investment in American history. This legislation, which was passed by the House of Representatives on Sept. 17, eliminates the Federal Family Education Loan Program, a wasteful government program that subsidizes private lenders to issue student loans. By cutting out banks as the unnecessary middle man, the federal government will save an estimated $87 billion over the next 10 years that will be allocated to student-friendly, need-based aid and essential access and retention programs at no new cost to taxpayers.

This bill would take the middle man - banks and private lenders - out of federally guaranteed student loans. Right now, the U.S. Education Department makes some student loans directly, but the rest - worth millions of dollars each year - are made by private lenders, who then receive government subsidies for doing so. Eliminating those payments will save $87 billion over 10 years, according to the Congressional Budget Office, so the bill will pay for its other provisions.

More help then will be available to more students. Over the next 10 years, $40 billion would be invested in building up the government's Pell grants, need-based scholarships that do not have to be repaid, so the maximum award available could go up annually, to keep pace with rising college costs.

The bill also would allow an additional $6 billion for Perkins low-cost, low-interest loans, thus reducing the number of students who would have to take out private educational loans, which have higher interest rates.

The bill that was passed by the House in September would provide about $80 billion over 10 years for President Obama's education initiatives. About $40 billion would go to the federal Pell grants program, which provides scholarships for low- and moderate-income students.

...

Community colleges would get as much as $12 billion to help prepare a more skilled workforce. At a time when many two-year colleges have seen their funding slashed, the additional funding would provide for job training and capital projects on campuses.

Nationally, community colleges enroll more than six million students. Many, including those in the Philadelphia region, have seen tremendous enrollment growth during the recession and also need additional funding.

Obama's education plan would also pour about $8 billion into early childhood programs, which in recent years have taken a backseat on the public-education agenda. America's historically black colleges and universities would also get $2.5 billion.

Colleges and universities have not slashed sticker prices in response to the economic downturn. On the contrary, tuition and fees rose 6.5 percent at public four-year colleges compared with the 2008-2009 school year and 4.4 percent at private, nonprofit, four-year institutions. Those were steeper rates of increase than in prior years, after adjusting for inflation. Over the past decade, annual increases have averaged 4.9 percent at public colleges and 2.6 percent at private colleges.

The historic legislation, championed by President Obama and approved by the U.S. House earlier this month, is a rare and welcome chance for Congress to actually streamline government instead of just talking about it. If approved by the Senate, the Student Loan and Fiscal Responsibility Act could save taxpayers $47 billion to $87 billion over the next 10 years by eliminating the middleman role private lenders play in federal education loans.

Families who now get their Stafford or parental PLUS loans through banks or credit unions or nonprofits such as Sallie Mae would instead borrow directly from the federal government, working through school financial aid offices just as they do now.

It was a blessed relief last week, in the thick of such intractable issues as health care and Afghanistan, to see the House of Representatives pass a piece of legislation that was urgently needed, made perfect sense and — mirabile dictu — could save taxpayers billions of dollars.

Members approved a bill that would end subsidies to private lenders who currently finance college loans, putting the government directly in charge. This significant measure, a longtime goal of Democrats, would save taxpayers about $87 billion over the next decade, estimates the Congressional Budget Office.

Those savings would be used to boost student grants, improve early education and pre-school programs, support community colleges and modernize public schools.

Democrats had been working for years to pass legislation curbing subsidies to lenders. Now, with a Democrat-controlled House, and with banks pretty much in the doghouse, the measure passed the House roughly along party lines, 253–171, with only four Democrats voting against and six Republicans in favor.

It is yet to be seen how the bill will fare in the Senate, but for now, it spells good news for students and taxpayers — especially in Texas, where, as reported by the Chronicle's Jeannie Kever, post-high school students have enrolled in record numbers for the current school year, in spite of concerns that the recession would dissuade many of them from entering college.

Community colleges told Kever that enrollment had “skyrocketed,” and preliminary data from four-year colleges show enrollment has increased in many of them too, assuaging fears that more students might opt for the cheaper community colleges.

• The Maine Campus (University of Maine):  "We applaud the representatives who passed what amounts to the largest higher education aid reform bill of our lives. We hope the Senate follows suit."
• The Daily Cardinal (Stanford University):  "The bill will help students graduate with less debt while saving taxpayers money. Such action is wise and long overdue."
• The Lariat online (Baylor University):   "Though the opposition may see this as just another area overtaken by the federal government that may lead to job loss through the industry or a burden on universities during the transition out of their respective federal lending programs, it is a risk and a burden well worth shouldering."
• Daily Pennsylvanian (University of Pennsylvania):  "Private lenders have shown that they are more trouble than they are worth, and redirecting the savings into expanding grants to students is an excellent, efficient redistribution of resources. We hope the House passes this bill."
• Georgetown Voice (Georgetown University):  "It is essential that the Senate passes this bill. As Hoyas who claim to strive for a diverse community, we must lend our support to initiatives like this, which are crucial to enabling people from every background to come here."
• The Daily Reveille (LSU):  "It’s finally time for banks to get their hands out of private education...Banks should not be in the business of profiting off the loans of students seeking the critical skills needed to compete in a global economy.  Higher education deserves better. Our nation’s undergraduates deserve every chance to succeed in America, and thus to make America succeed with them."
• Indiana Daily Student (University of Indiana):  "This bill decreases government bureaucracy, increases efficiency, wastes fewer taxpayer dollars and stops payouts to financial institutions for doing absolutely nothing but shifting their losses onto taxpayers. What’s not to love?"

It is somewhat curious that if you Google  "students who support FFELP" you will get the following message:  No results found for "students who support FFELP".

The bill, which passed 253 to 171, would allocate about $80 billion over the next decade for new loans, community colleges, school construction and early childhood programs without increasing taxes or adding to the deficit. How? Instead of paying bankers to provide loans for which they bear no real risk, the government would make the loans directly.

Liberals are always accused of spending money without worrying where it comes from, but in this case, costs are covered by making a government program more efficient -- yes, at the expense of bankers.

"We were paying these exorbitant subsidies to bankers who were taking government money, loaning it to somebody else, getting government guarantees that the loans would be paid back, and then taking all these profits," said Rep. George Miller (D-Calif.), the bill's champion. This, he told me, led Congress to ask itself: "Hey, chump, what is it you don't get about what's going on here?" The only knock on the proposal is ideological: that government is "taking over" the student loan program. But it's already a government program. The bill simply eliminates corporate welfare.

This is a classic case of how the Great Ideological Distortion Machine does its mischief: Instead of focusing on how the bill advances values typically regarded as "centrist" -- government efficiency, pay-as-you-go budgeting -- the banks' defenders bury the specifics behind abstract discussions of "big government." Yet I'd venture that middle-of-the-road Americans prefer that their tax money go toward education rather than to padding the profits of financial firms.

This afternoon, the House passed the Student Aid and Fiscal Responsibility Act (HR 3221) by a vote of 253-171. The bill ensures that higher education is more affordable at no additional expense to taxpayers – in fact, it saves money. More students will go to college, they will graduate with less debt, and the federal loan initiatives that they and their families depend upon will be strengthened for decades to come. The legislation will generate almost $100 billion in savings over the next 10 years that will be used to increase Pell Grant scholarships, keep interest rates on federal loans affordable, and safeguard federal student loan access for families.

Speaker Pelosi:

Education and Labor Committee Chairman George Miller (D-CA):

Chairman Miller: “My colleague on the other side of the aisle said that this legislation is the wrong way and the wrong place to make this investment. He’s got it exactly backwards. This is the exact way to make this investment. To take the savings by cutting the subsidies to the lenders and recycling those on behalf of families and students and our community institutions so that we can expand the educational opportunities in this country. we cannot continue just to wring our hands about our competitive place in the world..we must do something about it.”

Rep. Ruben Hinojosa (D-TX):

Hinojosa: “The legislation will increase affordability, accessibility and college completion rates particularly for first generation college low-income, minority and middle-class students. It invests $40 billion to increase the maximum annual Pell Grant scholarships to $5,550 by 2010 and 2019, $6,900 and provides low and middle income families with affordable, direct federal student loans and simplifies the application process for financial aid.”

Rep. Rob Andrews (D-NJ):

Andrews: “The issues before the House tonight are these. Do you agree or disagree that the time has come to make college more affordable for men and women around this country by making Pell Grant scholarships more available, student loans less expensive and more available? I think most people would say, yes, we do agree with that.”

Rep. Judy Chu (D-CA) on the investments the Student Aid and Fiscal Responsibility Act makes to community colleges:

Chu: “As a Professor for over 20 years, I know firsthand how important community colleges are to helping hard working Americans achieve their dreams. About one out of every two college students attends a community college and they are some of the hardest workers I have ever met. My students came from all walks of life - they were immigrants, single moms and laid-off workers and many of the students were the first in their families to go to college. Community colleges are the backbone of our nation’s workforce.”

Chairman Miller responds to criticism of the bill and Rep. Tim Bishop (D-NY) explains how this legislation reforms student loan practices for the benefit of both the taxpayer and the borrower:

Bishop: “What we are doing is we are paying private lenders a subsidy so that they will have the privilege of lending federally originated money to their borrowers. We guarantee repayment of that money to the tune of 97% of the amount outstanding and the private lenders reap whatever interest payments are paid by the borrowers. This is a really, really good deal for private lenders. It is a deal that costs the American taxpayer approximately $8 billion to $9 billion a year that we don’t need to spend in that fashion. We can provide, We, the federal government, can provide the loan capital that students need.”

• Invests the bill’s savings in making college affordable and helping more Americans graduate
• Provides reliable, affordable, high-quality Federal student loans for all families
• Prepares students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete
• Promotes early learning standards reform to ensure the next generation of children enter kindergarten with the skills they need to succeed in school
  
• Meets Pay-As-You-Go fiscally responsible principles and reduces the deficit  

Let us stop here and recall how the current loan system works:

1) Federal government provides private banks with capital.

2) Federal government pays private banks a subsidy to lend that capital to students.

3) Federal government guarantees said loans so the banks don’t have any risk.

And now, the proposed reform:

1) The federal government makes the loans.

....

If it all works out, Congress will have come a way toward fixing this problem, at least when it comes to federally financed student loans. There’s already a new law that forgives part or all of the debt for graduates who go into careers in public service. Terms will be easier for low-income debtors.

Congress has a chance, starting this week, to end the boondoggle that allows private lenders to earn a handsome subsidy for making risk-free student loans that are guaranteed by the federal government. It’s a wonderful deal for the lenders — and an emphatically bad one for the taxpayers.

The House is expected to vote on Thursday on a bill that would simplify the loan system — and save the country nearly $90 billion over the next decade — by ending the subsidy program and allowing students to borrow directly from the government through their colleges and universities. To get this done, however, lawmakers will need to see through the spin and misrepresentations that have become all too common lately.

...

Lawmakers need to put aside all the noise and pass this bill.

EXCEPT FOR a lucky few, paying for college isn't easy. Judging from how long it has taken, neither is reforming how the government provides the loans that make higher education affordable to millions. Yet Wednesday, as the House considers a bill that promises to save taxpayers billions of dollars, it's clear that the right choice is to vote yes.

Historically, the government has kept student-loan interest rates low through two programs: one in which the feds do the lending directly; and one in which the government subsidizes private entities that offer students loans at low, set interest rates. For more than a decade, private lenders fought back attempts to end the expensive subsidy system that kept them profitable at taxpayer expense. Then came the financial crisis, during which the public-private system fell apart, and the election of President Obama, who is intent on getting rid of the private middlemen.

According to the Congressional Budget Office (CBO), if the government directly financed all federally sponsored student loans, it would save $80 billion over 10 years. House Democrats have advanced a version of the president's plan that will probably get a vote in the House Thursday; the measure would put those savings into a range of worthy programs, from aid for community colleges to school renovation to larger Pell grants.