Miller: Congress Needs to Reform Health Insurance, Student Loans

WASHINGTON As escalating college costs continue driving Americans deeper into debt, big banks that lend to students are desperately clinging to tens of billions of unjustified and un affordable taxpayer subsidies.

If Congress makes the right call this week, students and taxpayers will win out.

In the coming days, the House and Senate will take a critical up or down vote on historic health insurance reforms. Tied to them will be the most significant reform of our federal student loan program in a generation. It will make federal aid more effective and cost-efficient for students, families, and taxpayers, without increasing the deficit.

Congress should support both measures.

The case for fixing today's backward student loan system is simple.

According to the Congressional Budget Office, the federal government is wasting $67 billion on subsidies to banks. President Obama and lawmakers, including some Republicans, believe these dollars could be better spent directly helping families pay for college.

Not surprisingly, banks are waging a ferocious battle to save their sweetheart deal. If they succeed, they will put at risk tens of billions of dollars that we would use to increase Pell Grants for lowand middle-income students, invest in Historically Black Colleges and Universities, Hispanic-Serving Institutions, and universities that focus on graduating minority students, and help reduce borrowers' monthly student loan payments.

Like the wild attacks on the health reform bill, opponents of student loan reform are playing fast and loose with the facts. Let's set the record straight.

Our bill is good for taxpayers. It would eliminate these needless bank subsidies and instead have the government initiate student loans directly, as it does today, and private banks service them. In fact, the government already funds 88 percent of all federal student loan volume, between the increasing numbers of colleges using direct government lending and emergency federal aid banks have depended on to stay afloat since the credit crisis.

Our bill is also good for students. The federal government has already proved to be a much more reliable lender for students through shaky financial markets and a fiscally responsible lender for taxpayers. All of the savings generated by switching to direct lending will be used to help students pay for college and reduce our deficit.

And our bill is good for American jobs. We specifically preserve private sector jobs by allowing banks to compete for contracts to service all loans. Unlike loans made by banks, loans financed by the U.S. Treasury must be serviced by U.S. workers -- and therefore could bring overseas jobs back home. Last year, Sallie Mae brought 2,000 jobs back to U.S. soil to win a direct loan servicing contract -- a fairly significant portion when you consider Sallie Mae employed 8,000 workers total in 2009. Sallie Mae is now one of four private banks servicing 4.4 million direct loans.

Presidents from both parties, including Bill Clinton and George W. Bush, have long identified this sweetheart deal as problematic. To his credit, Bush proposed trimming subsidies in 2005, 2006, and 2008. President Obama had the courage to take it a step further by calling for a complete end to this boondoggle.

Last year's House budget resolution instructed Congress to use majority rule to enact health and student loan reforms that generate a savings of at least $1 billion over five years. The idea of joining these bills has been publicly discussed for months since.

In reality, both Republicans and Democrats have a history of using majority rule for similar reforms. In 2005, Republicans used reconciliation to cut $12 billion from banks' subsidies -- but to finance tax breaks for the wealthy. In 2007, Democrats used reconciliation to reduce subsidies by $20 billion -- and reinvested the savings directly in students by increasing Pell Grants and cutting student loan interest rates, among other benefits. One hundred Republicans joined us in support.

Health reform and student loan reform share many things in common -- and combining the two pieces will help both pass Congress. Voting to put students before banks is an increasingly popular prospect as lawmakers continue to hear from constituents desperate to go to college, but unable to afford it.

That brings us to the banks' last-ditch gambit. Like many health reform opponents, in the days ahead they will publicly claim to be pro-reform, while privately working to kill it. They'll continue pushing their own alternative plan, without disclosing that it would divert at least $8.5 billion in savings to banks instead of students.

After a year of public debate, it's clear that banks don't like this bill. But students and families overwhelmingly do.

Lawmakers on the fence should remember what's at stake. Without this reform, as many as 8 million students could see their Pell Grants cut by 60 percent next year. There are few more effective job creators than producing a well-educated and skilled work force. We won't be able to sustain and grow a strong and competitive economy if our students can't afford to get educated for it.

Everyone says they want to change how Washington works. We face a rare moment in history when we can do just that. Congress can do the right thing by fixing two broken systems that are bankrupting American families -- or they continue rewarding insurance companies and banks.

U.S. Rep. George Miller (D-Calif.) is the chairman of the House Education and Labor Committee, the author of both the health insurance reform and student loan reform bills Congress will consider this week. Contact him at (202) 226-0853 or find out more at http://edlabor.house.gov/.