H 65°, L 49° | Tomorrow: 
H 60°, L 37°With President Barack Obama’s changes in healthcare struggling to gain footing within the House of Representatives, the future of reforms for student loans may be put in jeopardy.
These reforms were linked to healthcare budget reconciliation bills as a reaction to strong lobbying by the for-profit student loan lenders. Such bills need only a simple majority to pass rather than the 60 votes needed to present a filibuster.
According to a New York Times article, Senate Democrats predicted such educational reforms would not be a part of a budget measure for the final aspects of the healthcare bill. This development could stall reforms on student loans.
Normally, lenders would be hesitant to loan money to college or lower-income students for fear such individuals would default. Thus, they would either charge high interest rates or reject the loan altogether.
Under the current system, lenders can get such loans guaranteed or bought by the federal government so banks are not accountable if a student defaults.
The planned reforms, according to University of Wisconsin professor of public affairs and applied economics Andrew Reschovsky, would allow the federal government to spend less money purchasing loans from private lenders and put more money towards government funded Pell Grants.
According to records from the UW office of Academic Planning, over 3,500 UW undergraduate students received Pell Grants as of 2007.
The office of Sen. Russ Feingold, D-Wis., expressed its support for such changes in the student loan process, according to a statement.
Also supporting the reforms is Rep. Tammy Baldwin, D-Wis.
“By making this change, we can save the federal government billions of dollars,” Baldwin spokesperson Jerilyn Goodman said in an e-mail.
Several Senate Democrats sent a letter expressing their opposition about the student loan reforms to Senate Majority Leader Harry Reid, D-Nev.
In the letter, according to The New York Times, the senators expressed concern that such changes in the loaning process could put jobs at risk.
Others, like Rep. Tom Petri, R-Wis., are disappointed the changes in healthcare and those in education have been combined, spokesperson Neil Wright said.
“It’s unfortunate that student loan reforms and healthcare were bundled together for convenience,” Wright said.
According to Wright, Petri has long been an advocate of educational reform as a member of the Education Committee in Congress. However, because the reforms to student loaning practices were intertwined with healthcare reforms that he does not support, he cannot vote for the plan.
Spokesperson for Rep. Gwen Moore, D-Wis., David Frey, said while he could not express an opinion at the present time on the changes in question, Moore holds educational reform as a priority.
Some, like Wright, are uncertain about the timeline for further changes in student loans.
“It’s hard to say. I think that student loan reforms will ultimately pass, but maybe not this year,” Wright said.
However, according to a statement, Reid seemed optimistic that such changes would be addressed soon.
“We hope to consider student loan reform in the coming weeks,” Reid said.
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ECASLA is the answer. Lenders have not received any new subsidy since 2007. The government sets the interest rate for students and is charging students 6.8% on unsub loans and the banks only receive 1.5% of the 6.8%. This is all the interest income the banks receive while the government receives the 5.3% difference. The ECASLA program allows DOE to purchase the loans from banks as soon as they are fully disbursed and pays the bank $75.00 to administer the loan. So the banks only receive the 1.5% for the few months they have the loans. This administrative fee is very much in line with what it would cost DOE to administer the loan themselves. Banks provide needed outreach in communities and high schools for financial aid awareness and this will be missed if banks are eliminated from the program. Students should have a choice, It use to be the American Way!
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With the Legislative Affairs Committee of ASM and other Big Ten schools, we we’re recently in Washington to lobby on behalf of students to our legislators and we received verbal support from other senators as well.
Thank you BH for keeping this legislation in the forefront of student thought and we will continue to work on these legislative issues!
Adam Johnson Chair of Legislative Affairs