House OKs student-loan interest bill

Times Staff Writer

With fanfare and substantial bipartisan support, the House delivered Wednesday on the fifth of six bills that Democrats had vowed to quickly pass, voting overwhelmingly to cut the interest rate on some college student loans.

The bill, however, was much scaled back from House Speaker Nancy Pelosi’s campaign promise to cut all student loans in half.

Instead, the House measure, passed 356 to 71, applies to the 5.5 million subsidized Stafford loans given each year to students whose families earn $26,000 to $68,000 annually, but would not increase Pell Grants or student tax credits, as originally considered. The bill also sets a five-year phase-in of the interest rate reduction from 6.8% to 3.4%, but then, after six months at 3.4%, returns the rate to the original percentage.

House Democrats called it a “first step” on delivering some relief to students and their parents as college costs have skyrocketed 41% in public universities and 17% in private ones, and as college debt has doubled between 1993 and 2004, according to the independent U.S. Public Interest Research Group.

“This is only the beginning,” said Rep. George Miller (D-Martinez), chairman of the House Education and Labor Committee. “This is a down payment.”


The bill faces an uncertain future. In the Senate, education panel Chairman Edward M. Kennedy (D-Mass.) is considering a broader bill that would increase grants and tax credits as well.

And the Bush administration questioned the wisdom of encouraging more loans rather than grants. “Student debt loads have soared in recent years, and it is not clear that encouraging more loans is a wise course. Instead, the administration would support efforts to direct savings to additional grant support for low-income students,” said a statement issued by the Office of Management and Budget.

House Democrats, eager to keep their pledge to voters to pass long-stalled measures in their first 100 legislative hours, have sailed through four other bills: implementation of the Sept. 11 commission recommendations, an increase in the federal minimum wage, support for embryonic stem cell research and a plan to lower Medicare’s prescription drug prices.

Today, the House is expected to finish its juggernaut with a bill that would raise $14 billion over 10 years by rolling back tax credits and other breaks for oil companies.

“Last year, we said we were going to take America in a new direction,” Miller said at a news conference with education leaders and students before the debate. “By voting to cut student loan interest rates in half, we are showing we meant it.”

But the student loan bill required some deft maneuvering. Miller laid aside the original plan, which would have cost an estimated $45 billion, in favor of the slimmed-down and phased-in approach, whose $5.8-billion cost would be offset by cutting payments to lenders and guarantee agents.

Miller pledged that later in this congressional session, Democrats would find ways to increase Pell Grants, to make tax credits easier to understand, and to press colleges and universities to “do their part” in holding down costs.

Critics said the measure was the first casualty of the Democrats’ “pay-as-you-go” rule, which requires House members to find ways to offset spending increases.

“This is nothing but a sham,” said Rep. Virginia Foxx (R-N.C.), a former college administrator who said she took seven years to work her way through college. “They’re not keeping their promises. All they are doing is inviting colleges to increase tuition and fees. It’s very cynical.”

Democrats said their party’s House leaders had shown more fiscal responsibility than their predecessors. “Unlike the huge tax breaks for the energy industry at a time when they receive the most profit in their history, this bill doesn’t add to the deficit,” said Rep. Robert E. Andrews (D-N.J.). “This bill is paid for.”

Almost everyone who spoke during the three hours of debate agreed that skyrocketing college costs risked burdening a generation of students and their parents with debt, and that universities needed to do more to hold down costs.

Rep. Howard P. “Buck” McKeon (R-Santa Clarita), who managed the bill for Republicans, cited extravagant spending by colleges and universities, such as the University of Houston, to put hot tubs and other amenities in student centers.

The floor debate seemed, by Washington standards, civil, even amusing. At one point, McKeon offered three minutes to a colleague to speak on the bill and then turned to introduce him, saying, “My good friend from ... Where is my good friend from?” (His good friend is from Mississippi.)

But the partisan divide showed itself clearly across the aisle. Democrats charged that Republicans during their 12 years in power had “raided” student loans for $12 billion. Republicans replied that they cut lending fees and put some of the $12 billion in savings into Pell Grants.

Republicans alleged that Democrats were rushing to the floor -- without benefit of vetting by committees -- a bill that would give them a “Pyrrhic victory” during the 110th Congress’ first 100 hours, but do little to lower college costs. Democrats replied that they hoped to extend the lower loan rate beyond the five-year window in subsequent legislation.

Democrats chided the GOP for funding the Iraq war instead of investing in education. “It’s a shame, a disgrace that this country is willing to spend billions to fight a war in Iraq we know is a mistake while the doors of our colleges are closed to too many of our young people,” said Rep. John Lewis (D-Ga.).

Lenders bemoaned the Democrats’ tactic of paying for the bill by passing the increased costs to them. “A strategy of raiding a financial aid program to fund modest proposals is inadequate to the challenge; it is neither a bold nor bipartisan solution to making college affordable for every American,” said Kevin Bruns, executive director of America’s Student Loan Providers.

But education advocates were jubilant. “Twelve months ago, Congress was putting the finishing touches on a $12-billion cut to student loan programs,” said Luke Swarthout, the Public Interest Research Group’s higher-education lobbyist. “Now we’re talking about real policy to make college more affordable for millions of students. This is the right conversation to be having.”