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Top Democratic senators have positioned themselves against President Obama’s top education reform: cutting out the middleman on government loans to students. The bill is designed to end subsidized student lending by banks and increase grant aid to students.
 
The student loan reform is included in the reconciliation package of the revised health care bill, which has yet to be approved by the House and Senate.
 
“This [student loans language] is critical to passing this in the caucus,” California Rep. George Miller, one of the leaders of the health-care effort and chairman of the House Education and Labor Committee, said last week. “People have made it very clear they want to take this home.”
 
Currently, many college students receive government loans that get disbursed through private lenders. The loan program offers corporate lenders (such as Sallie Mae and Nelnet) a guaranteed rate of return while the government and tax-payers incur the extra cost and risk.
 
“The government not only makes all the decisions—who is eligible for loans, for what amount and at what rate—but it protects private lenders from virtually any risk," wrote Tim Dickinson of Rolling Stone. "When college students are unable to repay their debts, taxpayers are required by law to reimburse the banks for 97 percent of the losses."

The reform proposes shifting all loans to the government’s direct loan program and using the subsidies to provide additional aid to students.

But some Senate Democrats—Thomas Carper, Blanche Lincoln, Ben Nelson, Bill Nelson, Mark Warner and Jim Webb—have resisted the proposal. Some argue that adding this reform to pending health care legislation could significantly delay or kill student loan reform.
 
"[Increasing] our nation's commitment to higher education funding is a priority," the Democrats' letter said, "but we must proceed toward this objective in a thoughtful manner that considers potential alternative legislative proposals, while still delivering an equivalent amount of savings over the next ten years."

"Obviously, Sallie Mae and other banks, with their fistfulls of cash, are starting to have their way in the United States Senate," a Democratic Congressional aide told the New York Times.

Some pundits are predicting that on Wednesday, Democrats will remove student loan reform from the reconciliation package.
 
"It’s a matter of common sense versus corporate greed,” Dickinson wrote. “And right now too many Democratic senators are on the side of corporate greed.”
 
President Obama said that the real question is “whether we want to give tens of billions of tax dollars to special interests or whether we want to make college more affordable for 8.5 million more students.”
 
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