“Personal Finance Daily: Student-loan program may get overhaul, too (Market Watch)” plus 1 more |
Posted: 22 Mar 2010 02:15 PM PDT Alert Email Print By MarketWatch Don't miss these top stories:
While one version of health-care reform has passed and is on its way to President Obama for his signature, a separate reconciliation bill that now heads to the Senate has attached to it a move to end the federal government's subsidies to private student-loan lenders. The House passed this legislation last year but the Senate has yet to take it up. Now, presumably, they will. And if it passes, it could be a good thing for some students. Right now, the federal government assumes the risk for the loans that private lenders make to student borrowers. So why not have the government cut those subsidies to banks and instead give the savings to needy students? Under the proposal, as much as $60 billion would be freed up over 10 years, providing much-needed cash to the Pell grant program, as well as to help pay for other student aid and, too, for health-care reform. And banks would still be hired to service the loans. Certainly, any way to cut government costs seems like a powerful idea right about now. -- Andrea Coombes, Personal Finance editor What health reform means for youNo more worrying about lifetime limits on health coverage, about whether your insurer will dump you when you get sick, or about whether your adult child will be booted off your plan when he turns 18.See Vital Signs. Action on health care shifts to SenateThe fight over health-care reform shifts to the Senate this week, as lawmakers there are expected to vote on a package of changes to the historic bill that cleared the House of Representatives late Sunday.See story on health-care reform. Historic health-care overhaul goes to Obama for signatureIn a climactic vote after a year of wrenching debate, the House of Representatives on Sunday approved a Senate bill overhauling the U.S. health-care system, handing President Barack Obama a key victory on the most significant social-policy legislation in decades.See story on health-care reform. Who wins, loses in health overhaul?The pharmaceutical industry stands to gain with the passage of the health bill, while the insurance industry has mixed results, Stefanie Ilgenfritz reports on the News Hub. Watch Video Report. EXECUTIVE PAYFord CEO cashes in on company's big yearWhile the rest of the U.S. competition struggled just to stay alive amid last year's historic downturn in the auto industry, Ford Motor Co.'s fortunes actually rose. And so did Alan Mulally's.See story on executive pay. |
Posted: 21 Mar 2010 09:00 PM PDT The student aid initiative, which House Democrats attached to their final amendments to the health-care bill, would overhaul the student loan industry, eliminating a $60 billion program that supports private student loans with federal subsidies and replacing it with government lending to students. The House amendments will now go to the Senate. By ending the subsidies and effectively eliminating the middleman, the student loan bill would generate $61 billion in savings over 10 years, according to the nonpartisan Congressional Budget Office. Most of those savings, $36 billion, would go to Pell grants, funding an era of steady and predictable increases in the massive but underfunded federal aid program for needy students. Smaller portions would go toward reducing the deficit and to various Democratic priorities, including community colleges, historically black colleges and universities, and caps on loan payments. The bill's greatest impact would fall on the more than 6 million students who rely on Pell grants to finance their education. Pell, launched in 1973, once covered more than two-thirds of total costs at a public university. It now covers about one-third. The student aid measure was initially framed as a boost to the Pell program. Now it is seen as its salvation. Democratic leaders say that without a massive infusion of cash, the maximum grant could be scaled back by more than half to $2,150 and at least 500,000 students could be dropped from the program. "So if this legislation did not pass, you would see catastrophic cuts to the Pell grant program, effectively slamming the door shut for hundreds of thousands of students, if not millions, who rely on the Pell grant program to go to school," said Rich Williams, higher education associate for U.S. PIRG, the federation of state Public Interest Research Groups. Late Sunday, Arne Duncan, the U.S. education secretary, said, "Tonight's vote in the House is a big victory for America's students." Democratic leaders and student advocates hailed the aid package as simple, smart reform: Under the current Federal Family Education Loan program, the government effectively assumes the risk for loans issued by private lenders, who then pocket the subsidies. "You're taking billions of dollars in wasteful subsidies to student lenders and banks, and you're recycling that money on behalf of families and students to help pay for their college education," said Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee. House Republicans and lending industry lobbyists oppose the measure, calling it an unnecessary government takeover and envisioning a bumbling bureaucracy replacing efficient private-sector loan operations. "Instead of making student loans more affordable or preserving choice, competition and innovation in the loan program, Democrats are taking money from struggling students' pockets to help pay for a government takeover of health care," said Rep. Brett Guthrie (Ky.), senior Republican on the House subcommittee that oversees higher education. |
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