Budget Bill Could Open the Door to Major Cuts in the FFELP

The U.S. Congress has passed a fiscal-2008 budget resolution that could open the door to billions of dollars in cuts to the Federal Family Education Loan Program, the largest federal student-aid program. The measure includes an instruction to congressional education committees to find $750 million in savings in mandatory-spending items to reduce the budget deficit. The provision clears the way for shifting potentially tens of billions of dollars from the FFELP to other expenditures within the committee’s jurisdiction, as long as the net result meets the deficit-reduction target.

Rep. George Miller, D-Calif., who chairs the House Committee on Education and Labor, confirmed that was the intent of the reconciliation instruction. “Each year, the [federal student-aid] programs waste billions of taxpayer dollars on excessive subsidies to lenders,” Miller said. “That money should be used as intended — to help parents and students pay for college, not to pad the profits of big banks and lenders.”

Rep. Howard “Buck” McKeon of California, the ranking Republican on the House Education Committee, argued that the proposal was an abuse of the reconciliation process and vowed to fight any attempt to disadvantage the FFELP to the benefit of the William D. Ford Direct Loan Program. “I won’t stand idly by if the majority attempts to drive a stake through the heart of the market-based loan program,” McKeon said. “This would be terrible news for students and taxpayers alike, and I will do all I can to fight against it.”

The budget resolution sets the broad parameters for spending and taxation decisions that then are fleshed out through the reconciliation and annual appropriations processes.