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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.
