Nov. 4, 2005

Congress Acts on Budget Bills

The U.S. Senate on Thursday passed a bill that would cut more than $36 billion from mandatory spending programs, including more than $17 billion from student loan programs, after approving an amendment that would use some of those savings to lower costs for student borrowers. The budget committee in the House of Representatives, meanwhile, approved a parallel measure that would cut more than $50 billion in mandatory spending.

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The actions were part of Congress’s “budget reconciliation” process. Attached to the Senate measure, S 1932, is its version of legislation to renew the Higher Education Act, S 1614, which would use more than $8 billion in savings derived mostly from cuts in subsidies to banks and other lenders to create two need-based grant programs for students from low-income families and those who study science, mathematics and engineering.

On the Senate floor Thursday, lawmakers approved an amendment sponsored by Sen. Michael B. Enzi (R-Wyo.), chairman of the Senate Health, Education, Labor and Pensions Committee, that would use some additional savings that the panel slashed from the loan programs to cut the fee that students pay to originate loans to 2 percent from 3 percent, and eliminate those fees completely as of 2011.

The amendment, though, would use much of the extra savings from the loan programs to help elementary and secondary schools and students affected by Hurricanes Katrina and Rita, although college officials had argued for using those funds to expand opportunities for college students.

The parallel bill passed by the House Budget Committee would cut more than $14 billion from the loan programs, but would put all of the savings toward deficit reduction and other purposes, to the dismay of college and student groups. House leaders have argued that the vast majority of the savings would come from lenders, but House Democrats on Thursday said that a Congressional Budget Office analysis showed that billions would come from increased fees to students.

The sharply different approaches that the Senate and House are taking to the budget and Higher Education Act measures leaves an uncertain path for both pieces of legislation.

— Doug Lederman

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