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Early Ed Watch

A Blog from New America's Early Education Initiative

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Bank Subsidies vs. Early Learning Investments: An Update on Challenge Grants

Published:  February 18, 2010

Like so many people who follow early education, we have been waiting for months for the Senate to put forward its version of the Student Aid and Fiscal Responsibility Act. The bill, which quickly passed the House in September, uses savings from a restructuring of college student loan programs to provide funding for a variety of education programs, including the Early Learning Challenge Fund, a $1-billion-a-year program to improve the quality of child care and preschool programs. 

But with each passing day – and especially in light of the slowdown (shutdown?) in health care reform that had been the original excuse for the long wait -- advocates for the early learning program have become increasingly worried that it may not materialize. 
 
This week, U.S. Secretary of Education Arne Duncan made a round of conference calls to try to assuage those fears by ramping up arguments in favor of the student-aid bill. If passed, the legislation would eliminate the Federal Family Education Loan program and move all new student loans to the existing Direct Loan program.  This elimination is a smart move, as our colleagues at Higher Ed Watch have been arguing eloquently for years. While loans under both programs are the same for student borrowers, the FFEL program costs taxpayers a lot more because it pays banks subsidies to entice them to lend. In the legislation, the government would redirect these bank subsidies to the Early Learning Challenge Fund and several other programs designed to benefit public schools and incoming college students.
 
“We think the banking industry has had a free ride from taxpayers for too long,” Duncan said in a call yesterday to 500 people who administer or advocate for early education programs around the country. “We’ll put the savings to good use.”
 
In short, as the Senate stalls,  the Obama Administration is drawing battle lines. On one side are the banks that want to retain their subsidies. (Which, by the way, the banks would rather call “fees.” See our colleague Jason Delisle’s recent post on the cynical word games at play.)   On the other side are those in early education who are desperate for funding to improve the quality of child care and preschool programs so that children, especially those from low-income families, have a better chance of succeeding in school.
 
It’s not hard to figure out where Early Ed Watch stands in this fight. As we’ve written in our analysis of the Challenge Fund proposal, it may not be perfect -- there are tweaks we’d like to see that would help reinforce the connection between K-12 and the programs that serve children up to age 5 – but it would finally give early educators a chance to make quality improvements that the research shows are so sorely needed.  If the passage of the student-aid bill is in peril, as the New York Times reported yesterday, where will early education get its much-needed funding for quality improvements? In this economy, other sources of funding are nowhere to be seen.

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