Congress

The early childhood community is just starting to digest yesterday's news about legislation in Congress that could provide a new stream of money for states setting up high-quality early learning systems.

The student loan reform bill released by the Democratic chairman of the House Education and Labor Committee includes a consolation prize for the student loan industry. The bill cuts private lenders out of the administration of newly issued federal student loans almost entirely -- a major defeat for the industry and its lobbyists. It appears, however, that the bill's crafters have granted the industry one concession. They would allow lenders to change the index used to calculate the federal subsidies they receive on all outstanding FFEL loans issued since 2000. While this proposal raises some concerns and questions, it might actually be a fair solution to vexing interest rate problems caused by the credit crisis.

The LIBOR Switch

Currently, interest rate subsidy payments made to private lenders holding federally backed student loans are indexed to commercial paper interest rates. Lenders, however, usually need to finance the loans using LIBOR, a different index. When credit market disruptions hit full tilt last year, the two interest rates diverged radically, even though 3-month LIBOR historically had been only slightly higher. Spiking LIBOR interest rates squeezed the return lenders earned on loans. Although rates have since come back in line, the risk of another divergence remains.

We reported last year that the student loan industry was working the back rooms of the Capitol to persuade lawmakers to switch the index for all outstanding loans made since 2000 to the higher LIBOR rate. And in January we pointed out that the provision had been snuck in to an early version of the economic stimulus bill, but was then quietly dropped.

At Higher Ed Watch, we have spent most of the day eagerly awaiting the release of legislation that the Democratic leadership of the House Committee on Education and Labor has written to overhaul the federal student loan programs. Based upon news releases and press reports we had read over the last 24 hours, we had very high hopes for the bill.

Unfortunately now that we have begun to read the legislative text, we have decidedly mixed feelings about it. We are very pleased that Rep. George Miller, the California Democrat in charge of the committee, has followed President Obama's lead in proposing to end the Federal Family Education Loan (FFEL) Program and thereby eliminate unnecessary middlemen from the process of originating and guaranteeing federal student loans. Instead, as of July 1, 2001, all new federal loans would be made by the U.S. Department of Education through the Direct Loan Program.

We are also happy to see that a substantial share of the savings produced by shutting down FFELP would be used to significantly increase spending on Pell Grants and other high-need and chronically underfunded education programs.

However, we are sorely disappointed to see that the committee has included a set-aside for nonprofit student loan agencies to service federal student loans that is nearly identical to a proposal that the Education Finance Council (EFC), which represents these lenders, has been quietly shopping to a select group of Congressional offices in recent weeks. The legislation would essentially give each and every one of EFC's members a no-bid contract to service the loans of up to 100,000 student loan borrowers in their home states.

A centerpiece of President Obama's early education plan -- the Early Learning Challenge Fund -- just got its ticket to ride in a sweeping student aid bill introduced today by House Education and Labor Chairman George Miller.

Nearly a month after its ultramarathon of a markup began, the Senate Health, Education, Labor, and Pensions panel has finally blessed us with a Dodd-given, committee-approved, almost-ready-for-floor-action health reform bill. Yes friends, at approximately 10:16 a.m.

Does it seem like it's been weeks since the Senate Health, Education, Labor, and Pensions (HELP) Committee began marking up its health reform bill? It has. And although you may be indundated with tales of Democratic infighting, the HELP committee, for its part, has been a model of party unity as it works (and works and works) on the Affordable Health Choices Act.

Earlier this week we urged lawmakers not to put non-profit student loan providers on a pedestal. After all, these agencies are no strangers to scandal.

In a deal expected to be officially announced on Wednesday, July 8, the U.S. hospital industry has agreed to provide $155 billion in savings to help pay for health care reform, Ceci Connolly and Michael Shear write in today’s Washington Po

With Congress on the verge of considering legislation to eliminate the Federal Family Education Loan (FFEL) program, it is becoming increasingly clear that lawmakers don't want to go quite as far as the Obama administration proposed. Members of both parties are pushing Congressional leaders to preserve a role for nonprofit lenders in the federal student loan program.

Congress is back in session for what figures to be a frantic month of July. As the House and Senate gear up for a packed schedule of health reform hearings and mark-ups to meet a self-imposed August deadline, the White House has been working very hard to line up support outside the halls of Congress and keep the process moving.

First, there was the much-reported stakeholders' letter to the White House pledging to help slow health care spending by some $2 trillion over 10 years. Then, there was the $80 billion agreement with PhRMA—endorsed by the AARP—to lower costs of prescription drugs and help pay for reform. Just last week, the nation's largest employer, Wal-Mart, in a letter to the president also signed by SEIU and the Center for American Progress, stated that it was open to an employer mandate as part of the shared responsiblity it and other businesses bore for health reform.

Next up—hospitals.