House approves student loan bill

Democrats call interest rate cut a `first step' in relief

January 18, 2007|By Johanna Neuman | Johanna Neuman,LOS ANGELES TIMES

WASHINGTON -- With fanfare and substantial bipartisan support, the House delivered yesterday on the fifth of six bills that Democrats had to quickly pass, voting overwhelmingly to cut the interest rate on some college loans.

However, the bill was much scaled back from House Speaker Nancy Pelosi's campaign promise to cut all student loans in half.

Instead, the House measure, passed on a 356-71 vote, applies to the 5.5 million subsidized Stafford loans for students whose families earn $26,000 to $68,000 a year, but would not increase Pell Grants or student tax credits, as originally considered.

The bill also sets a five-year phase-in of the interest rate reduction from 6.8 percent to 3.4 percent, but then, after six months at 3.4 percent, returns the rate to the original percentage. House Democrats called it a "first step" on delivering some relief to students and their parents as college costs have skyrocketed 41 percent in public universities and 17 percent in private ones, and as college debt has doubled from 1993 to 2004, according to the independent U.S. Public Interest Research Group.

"This is only the beginning," said Rep. George Miller, a California Democrat who leads the House Education and Labor Committee. "This is a down payment."

The bill faces an uncertain future.

In the Senate, Sen. Edward M. Kennedy, a Massachusetts Democrat who leads the education committee, is considering a broader bill that would increase grants and tax credits.

And the Bush administration questioned the wisdom of encouraging more loans rather than grants.

"Student debt loads have soared in recent years, and it is not clear that encouraging more loans is a wise course. Instead, the administration would support efforts to direct savings to additional grant support for low-income students," said the statement issued by the Office of Management and Budget.

Eager to keep their pledge to voters to pass long-stalled legislation in their first 100 legislative hours, House Democrats have sailed through four other bills: implementation of the Sept 11 commission's recommendations, an increase in the minimum wage, support for embryonic stem cell research and a plan to lower Medicare's prescription drug prices.

Today, the House is expected to finish its juggernaut with a bill to roll back tax credits and other breaks for oil companies, valued at $14 billion over 10 years.

"Last year we said we were going to take America in a new direction," Miller said in a news conference with education leaders and students before the debate. "By voting to cut student loan interest rates in half, we are showing we meant it."

But the student loan bill required some deft maneuvering. Miller laid aside the original plan, which would have cost an estimated $45 billion, in favor of the slimmed-down and phased-in approach, whose $5.8 billion cost would be offset by cutting payments to lenders and guarantee agents.

Miller pledged that later in this Congress, Democrats would find ways to increase Pell Grants, to make tax credits easier to understand, and to press colleges and universities to "do their part" in holding down costs.

Critics said the measure was the first casualty of the Democrats' own "pay-as-you-go" rule, requiring them to find ways to pay for bills that increase government spending.

"This is nothing but a sham," said Rep. Virginia Foxx, a North Carolina Republican and former college administrator who said she took seven years to work her way through college. "They're not keeping their promises. All they are doing is inviting colleges to increase tuition and fees. It's very cynical."

Democrats said current House leaders have shown more fiscal responsibility than their predecessors.

"Unlike the huge tax breaks for the energy industry at a time when they receive the most profit in their history, this bill doesn't add to the deficit," said Rep. Robert E. Andrews, a New Jersey Democrat. "This bill is paid for."

Almost everyone who spoke during the three hours of debate agreed that skyrocketing college costs risk burdening a generation of students and their parents with debt, and that universities need to do more to hold down costs.

Rep. Howard P. "Buck" McKeon, a California Republican who managed the bill for Republicans, noted extravagant spending by colleges and universities, such as the University of Houston, to put hot tubs and other amenities in student centers.

Johanna Neuman writes for the Los Angeles Times.

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