Student Lending May Become Crippled By Health Care Legislative Maneuvers
Though credit unions aren't directly involved in the health care debate, due to some parliamentary maneuvering they are likely to lose the ability to offer certain student loans.
Senate Democrats don't have the 60 votes needed to overcome a likely GOP filibuster of a bill to replace the Federal Family Education Loan Program with direct student lending. Therefore, they are including it in the reconciliation bill that may be introduced to pass President Obama's health care proposal, which only requires 51 votes.
The House, which passed the bill 253-171 mostly along party lines last September, at press time was scheduled to vote on the reconciliation measure last weekend.
NAFCU Director of Legislative Affairs Brad Thaler said the student loan provision could be removed at the last minute if it proved an impediment to getting members on board for the health care overhaul.
"If they need to take it out to lure opponents of ending the student loan program, they will. The health care is their top priority," Thaler said. "But if the student loan repeal isn't passed this time, it will be their last chance, given the politics in the Senate and short time left this year."
CUNA Senior Vice President of Legislative Affairs John Magill said, "At this late date the fix [killing the program] is in. It's a fait accompli."
Approximately 1,000 credit unions offer these loans, but the Obama administration contends that replacing them with direct lending will save $87 billion over 10 years.
Many of those credit unions offer private loan programs and originate those loans.
According to the most recent Callahan and Associates analysis, the total amount of credit union-funded, private student loans is between $190 million and $220 million.
The bill would redirect funds currently paid to private lenders to fund increases the Pell Grant program, which aids low-income students.
In the past few years, credit unions have had increased opportunities in the student lending field because some larger banks don't offer those loans.
Last year, Congress passed legislation making credit unions with assets of less than $1 billion exempt from the rule that a financial institution can't have more than 50% of its loan portfolios in student loans. It gave credit unions parity with similar-sized community banks, which had previously had that exemption.