Administration Considering Plan to Fund Student Loans

The Bush Administration is considering a proposal for simplifying student loan programs under which the federal government would replace private banks as the source of more than $12 billion loaned to almost 5 million college students each year.

The White House is reviewing the student loan proposal for possible inclusion in President Bush’s 1992 budget request, Administration officials said.

Under the change being contemplated, the government would borrow as much as $12 billion--amid action to reduce the budget deficit--and use the money to create revolving loan funds at colleges and perhaps proprietary trade schools as well. Students would apply for loans at colleges, instead of private lending institutions.

The major shift in lending responsibility would save the government about $1 billion in fees currently paid to private lenders, but offsetting that savings would be the cost of private contracts for collecting from students.