Key senators balk at adding student loan overhaul to health-care legislation

By Lori Montgomery and Shailagh Murray
Washington Post Staff Writer
Thursday, March 11, 2010

As they push to finish health-care legislation by the end of the month, Democratic leaders in Congress are weighing whether to add another of President Obama's priorities to the package: a popular proposal to overhaul the federal student loan program.

The move could clear the way for Obama to claim victory on two of his most significant domestic initiatives in a single signing ceremony. Administration officials and House leaders have pressed aggressively for the addition in recent days. But key senators are objecting to the move, arguing that political resistance in the Senate and the rapidly rising cost of the education measure could jeopardize efforts to push health-care reform to final passage.

"I think it threatens the health-care bill," said Senate Budget Committee Chairman Kent Conrad (D-N.D.) "It would threaten to sink them both."

Democratic leaders met for a second day Wednesday with administration officials, including White House Chief of Staff Rahm Emanuel, in the office of House Speaker Nancy Pelosi (D-Calif.), but reached no decision on the student loan measure. One participant said a consensus appeared to be emerging that it would be unwise to risk the health-care bill by including the education measure.

The group also wrestled with new estimates showing that a plan to increase subsidies for low- and middle-income families to purchase health insurance would cost the government more than anticipated. That has required additional adjustments to the bill to keep its overall cost to around $950 billion over the next decade. Aides predicted that talks could drag on for several days.

"We've resolved a number of issues and, seriously, made a lot of good progress," Emanuel told reporters as the meeting broke up.

The projected cost of Obama's plan to expand Pell Grants and diminish the role of the private sector in the student loan program has exploded over the past year as more people seek college loans in the weak economy. Meanwhile, the potential savings from knocking private lenders out of the system has diminished as one in five colleges has already turned to government lending.

Rather than saving $50 billion over the next decade, the student loan initiative is now projected to increase deficits by about $5 billion, according to preliminary estimates provided to Democratic lawmakers. Including it in the health-care package could wreck efforts to meet the deficit-reduction goals required under reconciliation, aides said.

Advocates of the loan program urged congressional budget leaders Tuesday simply to use the old estimate when putting the reconciliation package together. But Conrad resisted, according to people familiar with the meeting, arguing it is no longer valid.

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