Support sought for direct student loans

January 27, 1995|By Kerry diGrazia | Kerry diGrazia,Contributing Writer Sun staff writer David Folkenflik contributed to this article.

WASHINGTON -- President Clinton met with college presidents yesterday to rally support for his administration's program to allow college students to borrow directly from the government, rather than from banks.

The Clinton administration's federal direct student-loan program proposes to save the government more than $4 billion over the next five years, by making loans directly rather than paying processing fees to banks. But critics argue that the program would create an unnecessary new bureaucracy and that any savings from the change would be negligible.

Opponents in Congress want to limit the scope of the direct student-loan program, although it is not clear how broad congressional opposition is. Republican Rep. Bill Goodling of Pennsylvania introduced legislation this week that would bar the direct-loan program from expanding beyond 40 percent of the loan market. The Department of Education plans to expand the program from its current 5 percent of the market to 100 percent by the 1997-1998 school year.

"We need to take a good, hard look at the program before it takes on a life of its own," Mr. Goodling said. "The Clinton administration has talked about promoting public-private sector partnerships, and yet they are dismantling what has been one of the most successful of such partnerships."

Mr. Clinton, apparently responding to the threat to the program posed by the Republican-led Congress, promoted the initiative in his State of the Union address Tuesday and again yesterday in his White House meeting with more than two dozen college presidents.

"We do not need a cap in the direct loan program," Mr. Clinton told the presidents, including Presidents William E. Kirwan of the University of Maryland College Park and Earl S. Richardson of Morgan State University. "The direct loan program is saving the government money, saving the student money and saving the institutions time and money."

At a news conference later, the college presidents expressed support for the program, which began this school year at about 104 colleges, with hundreds more expected to join next year.

Norman C. Francis, president of Xavier University in Louisiana, said he "couldn't be more pleased with the results."

Rep. Robert E. Andrews, a New Jersey Democrat, who is one of the direct-loan program's strongest proponents, defended it as "the best deal for the student and the government" and said the only losers are financial institutions that make billions annually in the student-loan business.

"This program ended a piece of welfare for Congress," Mr. Andrews said. "It cuts out an unnecessary subsidy to banks, guaranty agencies and Sallie Mae."

Sallie Mae -- formally the Student Loan Marketing Association -- is a private corporation created by the federal government which guarantees student loans and buys loans from banks to sell to investors.

At his breakfast meeting with the college presidents, Mr. Clinton also called for them to back his proposal for a tax credit for tuition payments and asked their help in squelching Republican plans to eliminate or reduce AmeriCorps, the Clinton-inspired program that subsidizes higher education in exchange for community service. The administration expects AmeriCorps to be financed by savings from making direct student loans.

In a December address to the nation, Mr. Clinton announced a tuition tax deduction of up to $10,000 a year as part of his "Middle Class Bill of Rights."

Many educators have expressed concern that those tax credits might supplant, rather than subsidize, existing tuition aid programs. But Mr. Clinton said the initiative would not imperil other aid programs.

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