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Economic News, Data and Analysis

Student Loan Cuts

Congress is set to take up a “reconciliaiton” budget bill that will include $15 billion (over 5 years) in cuts to student loans.

CongressDaily
Committee Approves $15B In Cuts To Student Loan Programs
The House Education and the Workforce Committee approved cuts Wednesday of about $15 billion in mandatory spending from student loan programs, as part of its contribution to the budget reconciliation package.
The panel was charged with finding $18.1 billion in savings over the next five years. The measure cleared the committee on a 22-19 party-line vote.
[JSI, Republicans voted for the cuts]
Education and the Workforce Chairman Boehner disputed Democratic claims that the measure would hinder students’ access to college. He said most of the savings in the bill come from administrative costs and subsidies to lenders, not from students.
“The students do fine under this proposal,” Boehner said. “These lenders out there, they’re bleeding. There’s no question we went after them in a big way. Say reconciliation wasn’t an issue, would we have gone as far as we did in this package? Probably not.”
But Democrats argued that lenders would not absorb the hits, but would pass them along to student borrowers, making loans more expensive.
Education and the Workforce ranking member George Miller, D-Calif., lambasted the Republican leadership for keeping tax cuts in place while attempting to enact, “the largest cuts in the entire history of federal student financial aid programs … Student aid programs are not a slush fund for Congress to raid whenever it wants tax cuts for the wealthy,” he said.
GOP committee aides say the measure would reduce insurance rates given to lenders to help protect them from defaulted loans, and increase lender fees. It also aims to lower collection costs, encouraging lenders to be efficient in collecting on loans, GOP aides said.
The bill would impose a 1 percent origination fee on college graduates who chose to consolidate their loans.

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