House Passes Bill Raising Loan Rates.

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Author: Burd, Stephen

In a party-line vote of 216 to 214, the U.S. House of Representatives gave final approval last week to a huge bill that would slash about $12-billion from the government-backed student-loan programs, to help slow the growth of federal spending over the next five years.

The cuts, which are the largest in the loan programs' history, account for one-third of the bill, a $39-billion deficit-reduction package. To achieve those savings, the bill would reduce government subsidies to private lenders, raise interest rates for students and parents, and require most borrowers to pay a 1-percent fee to agencies that guarantee loans.

The measure (S 1932), which was approved by the Senate in December, will now go to President Bush, who has said he will sign it into law.

While the bulk of the savings would be used to reduce the federal budget deficit and cut taxes, a portion â€" $3.75-billion over the next five years â€" would finance a new program providing more aid to high-achieving Pell Grant recipients and to those who major in mathematics, the sciences, or certain foreign languages. The savings would also raise borrowing limits for freshmen and sophomores, and reduce over five years the origination fees that students pay lenders to take out loans.[@]

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By Stephen Burd