Bush withdraws proposal to cut student loan program

by Nathaniel Ward | 5/3/02 5:00am

Bowing to considerable pressure from Congressional leaders and education lobbies, the Bush administration on Wednesday night withdrew its proposal to eliminate a program that allows students to consolidate variable interest rate loans at a low fixed rate.

Citing the need to eliminate the $1.3 billion shortfall in the proposed Pell Grant budget for fiscal year 2003, White House budget director Mitchell Daniels suggested the flexible interest rate plan last week.

Writing on behalf of a dozen higher-education groups, the American Council on Education wrote a letter to senators protesting the measure's proposed inclusion in the 2003 Supplemental Appropriations bill.

"A sudden change to the current system of setting borrower interest rates is the wrong approach and would dramatically increase the cost of loans to students," ACE President David Ward wrote.

Student advocates estimated that the nearly 700,000 students who receive Pell Grants would pay an average of at least $2,800 extra in interest for undergraduate costs alone if a variable rate were imposed.

The added expense, congressional leaders argued, would make college too expensive for low- and middle-income families who now rely on the loans to finance their higher education.

Under the current Pell Grant program, students receiving federal loans to pay for college can consolidate their loans into a single loan at a fixed, low-interest rate.

"It became evident pretty quickly that it wasn't a workable plan," said Dave Schnittger, communications director for the House Education and Workforce Committee, though he added the White House proposal did draw attention to the Pell Grant shortfall.

Many, including Sen. Ted Kennedy (D-Mass.), accused the administration of focusing not on students but on reducing spending to minimize the effects of the income tax cut passed last year.

"[Republicans] are definitely in trouble when the budget comes out," government Professor Matthew Lebo said, adding that "they're looking for ways to raise money without raising taxes."

There is "no question many college graduates who truly are in need are being well-served. That's not in dispute," Schnittger said. The more important question, he added, is whether some students receive benefits even though they don't require it.

The future of legislation to fix the Pell Grant deficit remains unclear.

Lebo said that the idea might reappear at a later date in a congressional bill and "be mixed up with hundreds and hundreds of other proposals."

If Democratic congressmen then veto that portion of the bill, Republicans could shift some of the blame for the budget deficit away from themselves, Lebo said.

Schnittger disagreed, saying that the unfeasibility of the current proposal means that it will almost certainly not reappear in its present form.

Instead, House Education and Workforce Committee chairman John Boehner (R-Ohio) will likely ask the General Accounting Office to determine who benefits most from the current loan consolidation program and consider legislation based on the study's results, Schnittger said.

Democrats have yet to submit a budget plan to compete with the one favored by President Bush. That means "when the rubber meets the road, it's the Republicans that really deliver for low-income students," Schnittger claimed.

Sen. Charlie Bass '74 (R-N.H.), who represents the congressional district that includes Hanover, did not have a reaction to the proposal since it was never introduced outside of its committee, press secretary Sally Tibbetts said.

"Most of the reaction you saw came from members who actually sit on the Appropriation Committee or have a partisan agenda to try to attack the administration," Tibbetts said. "Neither of those apply to Mr. Bass."

To propose a radical change such as this is a commonly used tool in politics, Lebo said, adding, "It's one way of testing the waters."