WASHINGTON – The long-expected reform of the student loan market – eliminating guaranteed student loans and replacing them with direct loans from the federal government – was passed Sunday night as part of the massive health care reform bill that narrowly passed the House.
The package will now go back to the Senate for a procedural vote and is expected to be approved there before the end of the week.
The measure will eliminate loans originated by credit unions and banks guaranteed under the Federal Family Education Loan Program and replace them with loans made directly by the government at an estimated savings of as much as $6 billion a year. Those funds, which were the subsidies paid to credit unions and banks, will be redirected to fund additional Pell college grants and to help offset costs of the health care bill.
The credit union lobby fought against the elimination of the guaranteed loan program. "NAFCU lobbied hard for the preservation of this important program," said NAFCU President Fred Becker after last night's vote. "We believe going to an all-direct loan program could create new challenges for credit union members to get the aid that they need to attend schools in the United States."
"In the current economic environment, many Americans have found it difficult to get credit for a number of purposes, including higher education, and have turned to their credit unions for assistance. Moving all federally backed education loans to a direct program stands to eliminate this important member benefit," said Becker.
The vote by the House, which passed the healthcare bill as part of a "budget reconciliation" bill, enabled its backers to bypass the possibility of a filibuster in the Senate, which would have required 60 otes to overcome, while the budget bill will only require a simple majority.
More than 1,500 credit unions participate in the guaranteed student loan program.
