Compromise Budget Resolution Holds Open Prospect of Future Student Loan Role for Private Entities

U.S. House and Senate Democrats have reached agreement on the outline of a 2010 federal budget that could clear the way for major changes in federal student loan programs but also preserve a role for current private sector participants.

The compromise budget resolution includes “budget reconciliation” instructions to both House and Senate education committees to find $1 billion in savings during the five-year budget period. The Obama administration has sought those instructions as the basis for its proposal to eliminate the Federal Family Education Loan Program and use the projected budgetary savings to enhance spending on Pell Grants.

The House and Senate conferees, however, included language in the compromise budget resolution expressing support for a continued role for private-sector and nonprofit entities in a reformed student loan program. The non-binding “sense of Congress” language states that “any reform of the federal student loan programs to ensure that students have reliable and efficient access to federal loans should include some future role for the currently involved private and non- profit entities, including state non-profits with 100% FFEL lending in the State, and capitalize on the current infrastructure provided by private and non-profit entities, in order both to provide employment to many Americans during this time of economic distress and to maintain valuable services that make post-secondary education more accessible and attainable for many Americans.”

The full House and Senate are expected to act on the budget resolution this week. The measure sets the broad parameters for spending and taxation policies for the fiscal year that begins Oct. 1. If the budget resolution is approved, the full House and Senate still would have to enact separate budget reconciliation legislation to effectuate changes to the student loan program, and the authorizing committees have been given an Oct. 15 deadline to produce such changes.