News flash! Some really good legislation that passed the House of Representatives is stuck in the Senate. In this case, it's the administration's plan to reform student lending by ending bank subsidies and pumping the tens of billions of dollars in savings into a federal direct lending program and expanded education grants.
In the Senate, this legislation has stalled in the face of a massive lobbying effort by the student lenders and opposition from several Democrats who have lenders in their states. (Would it surprise you to know that Evan Bayh is one of the reluctant Democrats siding with the financial sector?) Yesterday, Education Secretary Arne Duncan pushed the issue, rejecting a compromise proposal from lenders that would lessen the amount the government pays them but would still involve the government spending money on unnecessary services.
Much like health-care reform, the answer to this problem is budget reconciliation. Last year the Senate approved a measure that would allow this proposal to pass with a simple majority vote. Passing student lending this way is even more straightforward than using the reconciliation process on health care because the policy mechanisms and budgetary impact are much simpler. If this bill fails, it may well be the ultimate example of Washington's -- and particularly the Senate's -- inability to govern: Taking subsidies from private lenders and putting them to good use sending young Americans to college is the ultimate no-brainer. But if there is anything we know about the Senate, it is that no brains are required.
-- Tim Fernholz
