The House passed a bill today that would cut interest rates in half for student loans, but the measure is expected to face a shaky outcome in the Senate and an even harder time in the White House.
H.R.5 passed by a 356-71 vote. It would incrementally trim the current student loan interest rate of 6.8 percent to 3.4 percent by 2011. The bill applies to the federally subsidized Stafford loan, which the government awards to about 5 million low income students annually.
The reduction would cost the government approximately $6 billion, which would be recouped through cuts in five subsidies to major lenders who underwrite the student loans.
Proponents of the bill laud its cost-saving potential. A recent study found that H.R.5 could potentially save student borrowers as much as $4,420 over the life of their loan.
Some Republicans in the House voted for the measure even though the official GOP line is that the bill is misdirected because it does nothing to address the actual cost of college. Republicans argue that the $6 billion recouped from lenders and banks should be used to bolster the federal Pell Grant program.
In a heated House Rules Committee meeting last night, a Republican minority went back and forth with Democrats over the practicality of H.R.5.
"This bill addresses neither of the most important factors, which are access and affordability," Rep. Howard McKeon (R-Calif.) said. "Not one additional student will be able to go to college because of this bill."
Republicans, who boosted the Pell Grant program under their reign, believe that continuing to fund higher Pell Grants, rather than encouraging students to increase their debt, would better address the problem.
"It's like a foregone conclusion that you can't get through college without student loans," McKeon said. "And that's scary."
Republicans and Democrats agreed that the real problem is the overwhelming increase in tuition, especially when juxtaposed with the rising salaries of college administrators.
According to a recent report by the Chronicle of Higher Education, many college presidents' salaries have soared in recent years -- many of them rocketing past the $1 million mark.
At a meeting last month, Rep. George Miller (D-Calif.), who authored H.R.5, offered no solution to that problem but promised, "We're going to have some discussions."
The White House echoed the sentiments of the Republicans in the House and it's doubtful President George Bush will sign the bill.
"The Administration opposes H.R.5," according to a White House press release. "Reducing student loan interest rates would direct Federal subsidies to college graduates, not to students and their families who are struggling to meet current and future educational expenses. College graduates have higher lifetime earnings, and can already take advantage of flexible repayment options available under current law and reduce the effective interest rate they pay through the existing tax deduction for student loan interest."
The lenders and banks who will be faced with paying for the $6 billion difference warned the White House in a letter last week that should the bill become law, they would have to hike their fees to cover the lost subsidies.
"Cuts of this magnitude cannot be absorbed by the nation's loan providers without compromising the kinds of benefits and services now provided to college students and their families," the letter states.
The Democrats, who have pumped out five bills in about two weeks, started weighing on Republicans at last night's House Rules meeting which covered H.R.5 among other Democratic issues.
Rep. Pete Sessions (R-Texas) called Speaker of the House, Rep. Nancy Pelosi (D-Calif.), "ethically challenged" for refusing to allow amendments to the Democrats' first six bills, which are being rushed.
The Democratic majority demanded he rescind his comments. Sessions ignored them and instead heralded the efforts of ex-Majority Leader, Tom Delay, who was indicted last year.
After minutes of bickering, Sessions finally agreed to have his comments struck from the official record.