Democrats stall vote on student loan reform Direct government loans to students would end


WASHINGTON -- Accusing Republicans of catering to bankers and ignoring needy college students, Senate Democrats yesterday stalled proposals to curb direct government loans to students and to charge colleges a fee for every loan their students receive.

With senators eager to leave town by early afternoon, Democratic speechmaking in the Labor and Human Resources Committee delayed a vote until Tuesday to give educational institutions and their lobbyists more time to plead for votes.

Responding to earlier alarms from colleges, Sen. Nancy Kassebaum, R-Kan., who heads the committee, scaled back a proposal she made Tuesday from a charge of 2 percent of all federal loans issued to students at a college, to 0.85 percent.

"It's a tax, and it's a regressive tax on those schools that educate the neediest students in our country," bellowed Sen. Edward M. Kennedy, D-Mass., whose daylong passionate debating led Mrs. Kassebaum to ask him, mildly, to "stop shouting in my ear."

The fee is intended to raise $2 billion over seven years, down from $4.4 billion in Mrs. Kassebaum's first effort to find $10.8 billion in savings to meet the congressional target for a balanced budget. The other elements in Friday's budget plan would do these things:

* Require $4 billion in additional charges and reduced payments to lenders and loan-guarantee agencies.

* Eliminate the six-month post-graduation grace period in which no interest is charged on loans, saving $2.7 billion.

* Raise interest charges on the PLUS program of subsidized loans to parents, saving $694 million.

* Limit direct government loans to the colleges and universities now using them, or about 20 percent of all institutions nationally. Under new accounting rules adopted this year at Republican insistence, $1.5 billion would be saved.

The House Educational and Economic Opportunities Committee plans to vote Thursday on its version of the plan, which also would eliminate direct lending.

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