Pres. Bush proposes loan cuts
Amidst an uproar of opposition from leading senators, House Republicans have deemed a recent Bush administration proposal to drain $1.3 billion from a federally subsidized student loan program unworkable.
The Bush proposal would shift the low fixed interest rate for consolidated loans to a variable rate, potentially increasing college costs by leaving borrowers vulnerable to fluctuating interest.
Dave Schnittger, the Communications Director for the House Education and Workforce Committee, said House Republican leaders ruled that the proposal was unworkable, essentially eliminating any chances for approval. The Senate Appropriations Committee is currently evaluating the proposal.
Senators answered questions about the proposal in a conference call with college newspaper editors yesterday afternoon.
"What this really has to do with is forbidding students from taking advantage of low interest rates," Senator Ted Kennedy of Massachusetts said. Kennedy also maligned the proposal for what he perceived as a "shell game" to funnel funds into the upcoming tax break for high-income earners.
Schnittger denied this criticism and chastised outspoken Democrats for trying to "score political points."
"The core problem here is the fact that the Pell Grant program that provides hundreds of thousands of low-income students the opportunity to attend college is facing a $1.3 billion cash shortfall," he said. "In an effort to address that problem, the White House has been looking for an additional $1.3 billion."
While Pell Grants are available to low-income students only, the consolidation program in question is open to all levels of income earners. The program consolidates all of a student's loans and locks them into a fixed interest rate.
Student advocates estimate that the nearly 700,000 students under the program would pay an average of at least $2,800 extra in interest for undergraduate costs alone if a variable rate was imposed.
The Office of Budget Management introduced the proposal with a request for a $27 billion supplement to be used mainly for anti-terrorist programs. Federal budget projections for next year currently predict a $100 billion deficit.
"Now, in a $2 trillion budget, please, please tell me why we have to do this to students. It seems to me that in a $2 trillion budget this would be the last to be cut," Kennedy said.
Democrats have not proposed an alternative budget to the Republican model for the upcoming fiscal year.
Senator Murray said the proposal would unintentionally damage economic progress by limiting educational options and consequently shrinking the number of skilled workers.
"This is not a sound economic policy," Murray said. "The money that the proposal would save for doing this would actually cost us more in the long run."
Wellstone said the proposal would not only discourage many from attending college but would also limit a college graduate's options for professional degrees.
Philip Peisch '04, who spoke to reporters at a discussion of the bill in Concord, said that the proposal restricts undergraduate choices as well.
"I think its one of the worst legislative ideas in a while. It sends the wrong message to students who are working hard and paying their own way," he said. He also expressed his disappointment with New Hampshire federal representatives, as none of them issued a clear opinion on the proposal.
Proponents of the proposal criticize the current program's loopholes that enable graduates who become wealthy professionals to pay lower interest rates at the federal government's expense. Kennedy said these professionals provide vital services and, moreover, only 3 percent of college graduates attend graduate school.
Schnittger said that although the House will not support the proposal, it has highlighted a prevailing problem in the consolidation program.
"It isn't just needy students who are able to take advantage of the system. There are highly compensated individuals who are able to consolidate their student loans at federal expense who really don't need to consolidate their loans," Schnittger said.
Murray said the Bush administration has not fulfilled its obligation to fund other educational programs, citing Bush's lack of support for a bill to fund primary and secondary education.
"Senator Murray went ballistic on that one," Wellstone said.
As a result of shrinking state budgets, rising tuition costs at colleges nationwide next year are projected to force many high school graduates to forego higher education.
"One hundred ten thousand students won't be able to afford college next year and on top of this we find this effort by the Bush administration to cut loans," Kennedy said.
The federal government currently subsidizes loans like those offered by educational lender Sallie Mae, which allow students to consolidate all their outstanding loans under a fixed rate. Federal subsidies fill the financial gap between the fixed rate and the variable rates.
While the proposal would have continued the consolidation program, the variable rate would save the federal government $1.3 billion.
"It's a distorted priority as far as I'm concerned. We are going to oppose this with all of our might," Wellstone said.
Rep. George Miller of California led a rally of students and politicians on Capital Hill yesterday to protest the proposal.