The House of Representatives is poised to vote today on legislation to eliminate the Federal Family Education Loan Program and increase funding for Federal Pell Grants. The bill, currently known as the Student Aid and Fiscal Responsibility Act of 2009, is widely expected to be approved by the House, possibly with some amount of bipartisan support.  While most of the provisions in the bill have relatively widespread backing, one element has generated a fair amount of controversy. Under the proposed legislation, all federal student loans, such as Stafford Loans and Plus Loans, originated after July 1, 2010 would be part of the Federal Direct Loans Program, rather than the current bank-based system.

While initially both sides appeared ready for battle over the proposed legislation, controversy and rhetoric have cooled since the legislation was introduced. Alternative proposals that preserve some element of FFEL or otherwise grant a larger role to banks than in the bill currently before Congress have been proposed, but ultimately failed to generate the savings the Congressional Budget Office estimates this plan to carry, and thus have gained little momentum. Some Representatives still suggest submitting the proposal for further study and reviewing alternatives, but the plan to eliminate FFEL has gained the most widespread support.

Many Republican lawmakers still oppose the proposal to switch entirely to Direct Loans, with some making comparisons to the bank bailouts of earlier this year and the healthcare legislation currently being debated. The move to direct lending has also been repeatedly framed as eliminating choice for students, though the choice of direct loans versus bank-based loans has always rested with colleges and never with student borrowers.

Despite these objections, though, the bill appears to have the support necessary to pass the House and move on to the Senate, where it may face greater challenges. The option of passing it through the process of budget reconcilliation, which requires only a majority vote in the Senate, has been proposed, but whether the Senate goes that route remains to be seen.

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