Gop Backs Off Proposal To Raise Costs Of Student Loans

After a year of lobbying, college students and administrators apparently have convinced congressional Republicans not to raise their costs of federal loans.

Members of a House-Senate conference committee preparing a seven-year balanced budget plan have tentatively agreed on $4.9 billion in college aid cuts that would mainly hit financial institutions that provide the funds for government-backed loans.

However, the conferees still aim to cut back the direct student lending program, which bypasses commercial lenders and lets students borrow federal funds through campus financial aid offices. The program is strongly supported by the Clinton administration.

The conference committee agreements are tentative, a spokesman for Sen. Nancy Kassebaum, R-Kan., chairman of the Labor and Education Committee, said Tuesday. And President Clinton has promised to veto the overall GOP budget bill, which means more negotiations will be required afterward.

Still, the changes so far reflect a significant shift by the Republican majority.

“They have moved very, very substantially from where they started,” said Norman Ornstein, a congressional expert with the American Enterprise Institute.

Indeed, those early proposals aroused the nation’s academic community to form a lobbying Alliance to Save Student Aid that included about 40 groups representing college students, faculty and administrators. To the alliance, the most drastic of the budget cuts would have ended the interest subsidy enjoyed by students while enrolled in colleges or universities.

“That was our biggest concern. It was an issue of debt and access,” said Laura Wilcox, assistant director of public affairs for the American Council on Education. “It would have increased the cost of a student loan by 20 to 50 percent.”

Recommended by the House Budget Committee, this proposal would have let interest on student loans accrue while the student was enrolled in college. The repayment would not begin until after graduation, when the interest would be added to monthly installments. A Republican supporter said the added interest would amount to “the cost of a Big Gulp” a day.

However, the proposal sparked student demonstrations on Capitol Hill and college campuses across the country. Congressional Democrats charged that Republicans were gutting student loan programs that had benefited even the GOP leaders during their college years.

Quietly, the proposal was scaled back. The House dropped the idea of having interest accrue before graduation, though it voted to make students begin their loan repayments directly after graduation, dropping the current six-month grace period. And even that cutback was dropped in the Senate budget bill.

“We are vastly relieved at the fact that they backed off on eliminating the interest exemption,” said Wilcox.

In the House-Senate budget conference, the grace period apparently survived after moderate Senate Republicans threatened to vote against the whole budget package if they were unhappy with the student loan provision.

“It’s the need to keep votes,” Kassebaum told Congressional Quarterly. “The reality in the Senate is that four votes can lose it.”

There is no mystery to why the new majority in Congress decided not to make federal loans more costly to college students, explained Ornstein. “It hit at core constituencies that the Republican Party can ill afford to alienate,” he said.