House OKs rate cut for school loans

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

The bill, however, was much scaled back from House Speaker Nancy Pelosi’s campaign promise to cut all student loan interest rates in half.

Instead, the House measure, passed 356-71, applies to the 5.5 million subsidized Stafford loans for students whose families earn between $26,000 and $68,000 a year; it would not increase Pell Grants or student tax credits as originally considered. The bill sets a five-year phase-in of the interest rate reduction from 6.8 percent to 3.4 percent, then returns the rate to the original percentage after six months.

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 after college debt doubled between 1993 and 2004, according to the independent U.S. Public Interest Research Group.

“This is only the beginning,” said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee. “This is a down payment.”

The bill faces an uncertain future.

In the Senate, Sen. Edward M. Kennedy, D-Mass., chairman of the education committee, is considering a broader bill that would increase grants and tax credits.

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 a 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 9/11 Commission 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.

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, phased-in approach, whose $5.8 billion costs 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.

Rep. Virginia Foxx, R-N.C., a former college administrator who said she took seven years to work her way through college, said, “All they are doing is inviting colleges to increase tuition and fees. It’s very cynical.”

Republicans alleged Democrats were rushing to the floor – without benefit of vetting by committees – a bill that would give them a “pyrrhic victory” during the 110th Congress’ first 100 hours but would do little to lower college costs. Democrats replied that they hoped to extend the lower loan rate beyond the five-year window in later legislation.

Lenders bemoaned the Democrats’ tactic of paying for the bill by passing the higher costs to them.

But student-loan advocates were jubilant. “Twelve months ago, Congress was putting the finishing touches on a $12 billion cut to student loan programs,” said Luke Swarthout, higher-education lobbyist for the Public Interest Research Group. “Now we’re talking about real policy to make college more affordable for millions of students. This is the right conversation to be having.”