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SOURCE: StateGovernmentRadio.com
01.18.07
Vote to cut loan rates leaves poorest students behind
Author Unknown
WASHINGTON - The Democratic-controlled House voted overwhelmingly to cut interest rates on need-based student loans Wednesday, steadily whittling its list of early legislative priorities.
The legislation, passed 356-71, would slice rates on the subsidized loans from 6.8 percent to 3.4 percent in stages over five years at a cost to taxpayers of $6 billion. About 5.5 million students get the loans each year.
Though clearly popular, the legislation sparked a debate over where to set the nation's education priorities -- helping college graduates pay off their debts or expanding federal grants for low-income students.
Democrats conceded Congress needs to do more to make college more affordable. But they said reducing student loan rates is a significant step toward tuition relief.
The Bush administration opposes the bill, and Senate Democrats plan to bring up a more comprehensive bill that could complicate its prospects.
The House bill aims to reduce the $6 billion cost by reducing the government's guaranteed return to lenders that make student loans, cutting back the amount the government pays for defaulted loans and requiring banks to pay more in fees. Lending institutions opposed the bill.
"A strategy of raiding a financial aid program to fund modest proposals is inadequate to the challenge," said Kevin Bruns, executive director of the America's Student Loan Providers, a group that represents leading lenders.
After hearing from education advocates in North Carolina, U.S. Rep. Bob Etheridge, a Lillington Democrat, said in floor debate Wednesday that he supported the rate cut but worried about some of its effects. In North Carolina, a nonprofit agency affiliated with the UNC system is the lender for tens of thousands of subsidized student loans each year. The bill's offsets would increase costs to lenders, and advocates in North Carolina said those fees could be passed onto students.
"I am concer ned this legislation could have unintended consequences," Etheridge said.
In a floor exchange, U.S. Rep. George Miller of California, the bill's sponsor, promised Etheridge that members would revisit the costs as the bill moves through Congress.
"I pledge to maximize the benefits for the most number of students," Miller said.
Though the legislation matched the Democrats' pledge to pass student loan measure in the first 100 hours of legislative action by the new Congress, it fell short of their broader goal of lowering interest rates for parents who take out college loans for their children. During the 2006 congressional campaigns, Democrats also said they wanted to increase the maximum Pell Grant award from $4,050 to $5,100. Pell Grants go only to the neediest students and do not have to be paid back.
"We want to increase the Pell Grant," said Miller, who is chairman of the Education and Labor Committee. "We hope to be able to enlarge the tax deductions for parents paying for tuition and the cost of college beyond that."
Republicans argued that Democrats had chosen a politically expedient way to make good on a campaign promise instead of finding ways to increase federal college grants to help the poor.
"It is a whoop-de-doo bill," said Rep. Rob Bishop, R-Utah. "But to be honest, what it does for my kids in college is nothing. What it does for the friends of my kids in college is nothing."
Still, 124 Republicans voted for the bill.
