By Alexander Bolton - 03/13/10 11:00 AM EST
Senate Democrats are getting ready to cut billions from a House-passed student loan bill in a move that would essentially gut one of President Barack Obama’s major education initiatives.
But the funding cuts must happen if the student loan legislation is to be paired with a healthcare reform companion measure in the reconciliation process.
“The magnitude of the impact on community colleges of not funding this program cannot be overestimated,” said David Baime, vice president for government relations at the American Association of Community Colleges.
“The president has been talking about this since last July and colleges are deeply invested in this program,” Baime added.
Obama unveiled his graduation initiative in July to a cheering crowd in Michigan.
“Today I'm announcing the most significant down payment yet on reaching the goal of having the highest college graduation rate of any nation in the world,” Obama declared at a rally at Macomb Community College.
“We're going to achieve this in the next 10 years,” he said. “And it's called the American Graduation Initiative. It will reform and strengthen community colleges like this one from coast to coast so they get the resources that students and schools need -- and the results workers and businesses demand.”
Obama called for 5 million additional college graduates by 2020.
But that lofty goal, along with several of the president’s other ambitious policy visions, has been dragged down by the weak economy and the reluctance of centrist Democrats in the Senate.
Democratic sources and industry lobbyists also expect senators to cut $8 billion slated to improve the quality of early education programs and $3 billion for a program to help high school students stay enrolled and graduate.
The funding was included in the Student Aid and Fiscal Responsibility Act, which the House passed in July.
The student lending legislation would allow the federal government to originate student loans, saving taxpayers an estimated $61 billion to $67 billion over 10 years, and fund Pell Grants to low-income college students.
Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-Iowa) has yet to unveil his student lending bill and a Democratic aide said “all of this is still on the negotiating table.”
But other aides and interest groups tracking the process say the cuts are inevitable because of a decision to include the student lending bill in a reconciliation package.
When Democrats took control of Congress in 2007, they adopted a rule that budget reconciliation rules could not be used to pass legislation adding to the federal deficit (or reducing the surplus).
Although Republicans used the special budgetary procedures to pass major tax relief packages with a simple majority in 2001 and 2003, Democrats do not have the same flexibility.
Compounding the budget crunch for the student lending bill, Senate Budget Committee Chairman Kent Conrad (D-N.D.) has projected that the student lending reform would save taxpayers only $61 billion over 10 years.
The Congressional Budget Office initially estimated that making the federal government, instead of private banks, the originator of student loans would save $87 billion over a decade.
The upshot is that lawmakers have significantly less money on the table to fund new education programs such as the American Graduation Initiative.
Lawmakers originally thought it would cost $31 billion to fund Pell Grants over the next 10 years. However, Pell grant funding is expected to cost $54 billion over 10 years because of growing demand for education loans as more people apply to school in tough economic times, leading to an unexpected shortfall.
Lobbyists estimate Conrad will have to cut more than $21 billion over five years from the student lending bill if it is to meet the savings target required by reconciliation rules.
The student lending bill also funds historically black colleges and “Hispanic-serving institutions.” But sources describe these programs as untouchable because of strong support from the Congressional Black and Hispanic caucuses in the House.
Since funding for black colleges and Hispanic-serving institutions is such a high priority, programs benefiting community colleges, early education and student retention will bear the brunt. (Some community colleges, however, will benefit from new funding to Hispanic-serving institutions.)
Funding for a new program to boost community college graduation also ran into political opposition from Senate Democratic centrists, who have clashed with Obama over other ambitious policy proposals.
Centrists derailed Obama’s proposal to create a government-run health insurance program known as the public option.
“There was outrage among Senate moderates about creating new education programs when Congress is scrounging every nickel to pay for healthcare,” said an education lobbyist.
During a conference meeting Thursday, Senate Democratic leaders discussed the prospect of combining student loan legislation with healthcare reform fixes in a budget reconciliation package.
Although Senate Majority Leader Harry Reid (D-Nev.) says no final decision has been made, sources say it’s all but certain the student lending measure will be included.
A Senate Democratic aide noted that the student lending measure would be necessary for the HELP Committee to craft a reconciliation bill that produced the required savings.
Without piggybacking on the lending bill, it would become more difficult to use reconciliation to pass healthcare fixes under the HELP Committee’s jurisdiction.
Legislation considered under the special budgetary rules known as reconciliation needs only a simple majority to pass the Senate.
House-demanded healthcare reform fixes and student lending legislation that would replace private banks as loan originators could not muster 60 votes to pass the Senate under regular order.