Monday, March 22, 2010

Student Loan Reform Inside Reconciliation Bill

The Senate is expected to vote on the reconciliation fixes, which includes student loan reform, that the House passed last night. What a night it was. Who knows when the reconciliation bill will pass, but Harry Reid says he has the votes (only 51 needed). Ben Nelson says he'll vote against reconciliation, but his vote isn't needed. Blanche Lincoln also opposes the reconciliation bill. But apparently, she isn't needed either.
Debate on the reconciliation bill is expected to start tomorrow.
Here's what the student loan reform does--it saves money, it says goodbye to the middle man, which is probably why Nelson doesn't like it much. Oh, and the reconciliation bill gives the boot to Nelson's cornhusker kickback, as it rightly should. Nelson seems like a shady guy.
Under student loan reform, expected to go into effect July 1, the government will directly loan money to students:
In the new system, the government will lend all of that money directly to students. The government will still pay private companies to service the loans -- that includes collecting payments and trying to keep people from defaulting.

The shift shouldn't make much difference for students, according to Justin Draeger of the National Association of Student Financial Aid Administrators.

But cutting out the middle man will save the government $61 billion over the next 10 years, the CBO estimates. (The government will also incur $5 billion in new administrative costs.) About two thirds of the savings will go toward grants for low-income students, and about a third of it will go toward reducing the deficit. Read more at Planet Money, the best explainer of all things financial.