By Jim Kuhnhenn, Associated Press Writer
WASHINGTON (AP) — Banks and other private lenders are about to lose a $70 billion-a-year student loan business, part of a massive overhaul of college assistance programs that has received an unexpected boost from President Barack Obama's health care success.
Industry lobbyists have watched helplessly as Democrats and the Obama administration appear on the verge of shifting student lending from private banks to the federal government.
Under the measure, private banks would no longer get fees from the government for acting as middlemen in loans to low- and middle-income students. With those savings, the government would increase Pell Grants to needy students and make it easier for workers burdened by student loans to pay them back.
The bill would mean the loss of billions of dollars in business to student lending giant Sallie Mae as well as large financial institutions such as Citigroup, JPMorgan Chase and Bank of America.
In an unusual twist, the fate of the student loan overhaul went from certain death in the Senate to certain victory thanks to Republican Scott Brown's election in January in the race for the seat of the late Sen. Edward Kennedy.
Until then, the legislation was not moving in the Senate because it lacked 60 votes to overcome a filibuster. But after Brown's election, Democrats decided that their health care initiative could pass only if Congress approved a companion bill that resolved differences between the House and Senate. That expedited measure requires only a simple majority vote.
The companion bill became a home to the student lending proposal and gave it a new lease on life.
The Senate began debating that bill Tuesday and is set to vote on it later this week.