- The Washington Times - Friday, October 8, 2004

The House yesterday unanimously passed a bill aimed at saving billions of dollars in future federal subsidies to commercial and nonprofit lenders of student loans, and to shift the savings to help teachers with their educational debts.

On a 414-0 vote, Republicans pushed through the legislation to end a guaranteed return of 9.5 percent to lenders of student loans, which currently have interest rates of less than 3.4 percent. Federal subsidies make up the difference of the higher rate implemented during the Clinton administration.

“Eight months ago, President Bush called on Congress to pass legislation to shut down these excess taxpayer subsidies,” Rep. John A. Boehner, Ohio Republican and chairman of the Education and the Workforce Committee, told the House.

“This bill will use the money to help teachers and poor schools across our country.”

The subsidy cost taxpayers $634 million this year through June 30 and $556 million in 2003, said the Government Accountability Office, which warned that the special allowance soon would escalate into billions more.

Democrats said they reluctantly supported the bill but wanted to go further by retroactively cutting the federally guaranteed 9.5 percent return for college loan lenders who recycled profits from current loans into new ones that capture more federal subsidies.

Rep. Chris Van Hollen, Maryland Democrat, said an estimated 40 percent of outstanding federally subsidized college loans totaling $23 billion to $31 billion over the past several years have been recycled.

“Let’s close the loophole,” said Rep. George Miller of California, the committee’s ranking Democrat, who termed it “a rip-off” abused by large commercial banks.

“We don’t deal with those provisions of this program that continue these unconscionable profits. I’m sorry that we can’t go the whole way.”

However, Mr. Boehner said the Democrats’ plan would devastate dozens of state nonprofit student aid providers whose benefits make colleges accessible to future teachers and nurses in communities with shortages.

“Shutting the 9.5 percent subsidies down retroactively won’t just affect the big kids on the block,” Mr. Boehner said. “It will affect smaller nonprofit student aid providers all across America that were told for years by the federal government that this practice [of recycling loans] is 100 percent legal and legitimate.”

Sen. Judd Gregg, New Hampshire Republican and chairman of the Health, Education, Labor and Pensions Committee, said he hopes the Senate can pass the bill by the end of the week before Congress recesses for the Nov. 2 elections.

“The choice is simple: Pass this legislation and provide more student benefits or block this legislation and allow lenders to continue taking advantage of this loophole,” Mr. Gregg said.

The bill also provides as much as $17,500 in loan forgiveness — more than triple the current amount — to teachers in the fields of math, science and special education who commit to teaching for five years in schools in high-poverty areas.

So far, Senate Democrats have blocked House-passed bills to reauthorize college programs under the federal Higher Education Act, which expires this year. Yesterday’s House bill extends several such programs, including those that provide student aid, for one year.

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