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Washington
Committee still eyeing FFELP subsidy cut
WASHINGTON (6/26/09)—A plan to eliminate the Department of Education's Federal Family Education Loans Program (FFELP) by cutting off its federal subsidy has temporarily been placed on the back burner, but the House Education, Labor and Pensions Committee intends soon to vote on a bill to do just that. According to a committee source, the education panel could possibly markup a FFLEP bill sometime during the first two weeks of July. There had been speculation that the committee would take up the bill this week, but a crowded congressional schedule bumped its consideration back. Notably, healthcare reform has been dominating attention. The Obama administration’s fiscal year 2010 budget took aim to reduce certain entitlement spending and estimated that eliminating the subsidies provided under FFELP could save over $4 billion, annually. The administration has said it favors direct student lending by the government and would use some of the $4 billion to provide need-based Pell Grants to low-income students. The FFELP subsidy was cut back under President George W. Bush, but credit unions have continued to offer the loans, with little or no profit, as a service to their members, according to Phil Drager, Credit Union National Association (CUNA) senior legislative representative. CUNA has previously warned that the elimination of FFELP could jeopardize student lending at more than 1,000 credit unions throughout the country, and may end student lending by credit unions altogether. As CUNA noted in a letter to the top members of the House Education Committee, credit unions that specialize in student lending provide a high quality service for their student members, and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students. Drager said Thursday that CUNA "continues to meet with key members of Congress to explain the importance of the FFELP and the critical role credit unions play in the program." Both houses of Congress will take a one-week Independence Day District Work Break, and when federal lawmakers return to session, there will be just five, issues-crowded weeks left in the summer session.
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