Tuesday, March 23, 2010

Why Are Student Loans In the Health Bill?

Why are changes to student loans part of the health care package?

The reconciliation bill passed by the House includes sweeping changes not just to health care but to the federal student loans program.

Tucked inside the package (HR 4872 ) to amend the Senate’s health care bill (HR 3590 ) is a provision that ends federal subsidies for private banks that give out student loans.

For years, the government has paid those banks when students default on these loans. Now, the idea first proposed under President Clinton would make the government the sole direct lender of federal student loans.

There are two reasons why this is in the health care bill.

First, the tactic avoids a separate vote on the issue. The Senate may have pushed back on the idea, which the banking industry and many conservatives have opposed because they say it will eliminate jobs and result in a government takeover of the loans program.

Second, the $61 billion saved over the next decade by nixing the bank subsidies helps the health care bill meet cost-saving requirements. About two-thirds of the savings will be applied to more grants for low-income students, while $10 billion will go to reducing the federal deficit.

– Ambreen Ali, Congress.org

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