January 22, 2007
White House Opposes Student Loan Rate Cut
An article from cnnmoney.com last week was brought to my attention today – I missed it last week. Please note that this was published before the measure was approved by the house last week, and also that the White House has not yet threatened to veto the measure, though they disapprove of it.
White House Opposes Dem Student Loan Rate Cut Plan
(Updates to add latest estimates of rate cut cost)
John Godfrey WASHINGTON -(Dow Jones)- Warning that it may be bad to encourage students to borrow more, the White House announced Tuesday that it is opposed to a student loan interest rate cut being pushed this week by House Democrats.
“Student debt loads have soared in recent years, and it is not clear that encouraging more loans is a wise course,” the White House’s Office of Management and Budget said in a statement of opposition. Encouraging more debt could “fuel today’s upward tuition spiral,” the OMB warned.
A statement of opposition is stronger than one expressing “concerns” but is several steps shy of the threat of a veto.
The House bill would raise fees on and cut profit margins for student lenders to offset a proposed cut in student-loan interest rates for lower-income families.
According to an estimate of the bill released Tuesday afternoon by the Congressional Budget Office, the rate cut would cost $8.1 billion over the next five years.
Increased loan fees would raise $2.7 billion and reducing guaranteed lender profit margins would raise another $2.5 billion over the same period, according to CBO. The remainder of the cost would be raised by reducing lender guarantees and retaining certain guaranty agency collections.
A Senate version of the interest rate cut plan would encourage students to use direct loan programs, in theory saving money by cutting out private sector middlemen.
Student-loan giant Sallie Mae (SLM) has begun lobbying against the proposals, taking out an advertisement in at least one Capitol Hill newspaper encouraging readers to “tell Congress to give students real help. Don’t cut the programs they need.”
While Democrats and student advocacy groups are pressing these and other proposals to make it easier for students to pay the ever-increasing cost of higher education, not on the table so far are proposals to bring tuition growth under control.
According to the OMB, spending on federal student aid has increased by 57% over the last six years.
Now, said the OMB, colleges must take joint responsibility for making college education affordable.
The House is expected to vote on their version of the bill Thursday. Despite promising during the 2006 campaign to allow more open debate of such measures, House Democrats plan to block Republicans from offering any amendments to the bill.