Higher ed. bill nears resolution

The debate over student loan interest rates took one more step toward resolution yesterday.

The U.S. Senate Labor and the Workforce Committee passed the Higher Education Reauthorization Bill with no substantive changes to the version of the bill passed in the House last week.

The Senate reported a bill from committee that will lower interest rates on guaranteed loans for students to 6.9 percent during school and 7.4 percent after graduation.

Associate Vice President for Government Relations Thomas Butts said the resolution will definitely aid students who have the guaranteed loans.

"These are the same interest rate provisions as passed in the House," Butts said. "There is clear support for interest rate reduction for students."

Sen. Edward Kennedy (D-Mass.) offered an amendment that would have lowered the interest rates further than the final numbers, but he rescinded the amendment in an attempt to avoid deadlock, said Kennedy spokesperson Jim Manley.

"Sen. Kennedy was not willing to prolong debate at this time," Manley said. "He is trying to forge compromise on as many issues as possible."

Kennedy's amendment would have reduced the interest rate to 0.3 percent more than the agreed upon numbers.

"There's a real concern that this will continue to provide incentives to banks and not enough for the students to get low rates on student loans," Manley said.

Manley said Kennedy achieved what he wanted in proposing the amendment, but he does hope changes can be made to further aid students.

"He wanted to stimulate a dialogue," Manley said. "He believes there is a willingness to work out a bi-partisan agreement in conference committee."

Butts said it is possible to further change the bill because there will be more discussion about it in the coming months.

"It continues to be a work in progress. I suspect there will be a lot of discussion before the bill even goes to the floor," Butts said. He added that the full House may consider the bill later this month, while the Senate will probably wait until May.

One possible sticking point that emerged late last week is the amount of money tax payers will contribute to private lenders in order to keep them in the guaranteed loan business.

Both the House and Senate versions of the bill include a provision that will pay banks an additional .5 percent for each student loan. This agreement, made in an effort to appease banks and allow them to maintain profit levels, will be funded with taxpayer money.

But the amount of money need for that funding is still being debated.

The Congressional Budget Office estimates tax payers will contribute $1.2 billion in the next five years. This was the estimate the House committee used when they passed their bill. But the Office of Management and Budget calculated the total to be $2.7 billion and reported those findings last week.

"There is still a very serious problem in the amount of taxpayer money that will go to the banks if (the proposed money for lenders) is more than the administration's proposal," Butts said.

The bill will also reduce origination fees on loans, which are charged immediately after a loan is taken out, from its current rate of 4 percent.

"We'd like to see students not have to endure this fee," Butts said.

04-02-98