House passes student loan bill
WASHINGTON -- The House moved yesterday to cut off the flow of billions of taxpayer dollars to banks by ending the guarantee of a whopping 9.5 percent return to lenders of student loans.
The Republican-led House unanimously approved a bill that would halt the high interest rate on new loans and shift the savings to help teachers pay college loans. The plan would last one year, with sponsors promising a more permanent fix when Congress renews the nation's higher education law next year.
For years, the guarantee to banks has been a profit-maker because the government must pay them whatever amount of interest students do not, and students are now paying less than 3.4 percent.
The bank subsidy cost taxpayers $556 million in 2003 and $634 million through June 2004, and is poised to quickly escalate into billions of more dollars, the Government Accountability Office found.
The bill will "protect the taxpayers, support schoolteachers, and help poor schools ensure every student has the opportunity to learn from qualified teachers," said the House Education and the Workforce Committee chairman, John Boehner, Republican of Ohio.
Democrats said they reluctantly supported a flawed bill. They favor a permanent ban now, not a one-year fix. And they said the Republican version retains a loophole that allows banks to recycle the profits from current loans and then create new ones that still promise the large government payments.
"We don't deal with those provisions of this program that continue these unconscionable profits at the 9.5 [percent] loans due to recycling," said Representative George Miller of California, the top Democrat on the education committee. "I'm sorry that we can't go the whole way."
Republican leaders in the Senate hope to pass the bill by the end of the week, when Congress is scheduled to recess for the election. The White House backs the measure.
"The choice is simple: Pass this legislation and provide more student benefits, or block this legislation and allow lenders to continue taking advantage of this loophole," said Senator Judd Gregg, Republican of New Hampshire and chairman of the Senate education committee.
Under the Republican bill, teachers who spend five years in poor schools and in the fields of math, science, and special education would get as much as $17,500 in loan forgiveness, more than triple the current aid. The Senate estimates the bill would free up as much as $270 million in one year.
