House OKs plan to cut rates on student loans

The House yesterday approved the Democrats’ plan to gradually cut in half the interest rate on some federally backed student loans, but critics said it won’t help current students and has been oversold to Americans.

The bill, which would cut the rate from 6.8 percent to 3.4 percent over five years on need-based student loans for undergraduates, was approved on a 356-71 vote, with 124 Republicans supporting the measure.

Democrats promoted the idea on the campaign trail and included the bill as part of their “first 100 hours” agenda. Proponents say it will help 5.5 million students each year and save the average student borrower $4,400.

“We will, for the first time in a long time, start to make college more affordable,” said Rep. George Miller, California Democrat and chairman of the House Education and the Workforce Committee.

House Speaker Nancy Pelosi, California Democrat, said the “crucial legislation will help remove some of the barriers to a higher education.”

Some Republicans, the White House and other critics said the bill will not help current students pay high tuition costs because it is aimed at those who already have graduated. Republicans also noted that the measure would provide the lowest 3.4 percent interest rate for just six months in 2011, after which it would revert back to the current 6.8 percent.

“This bill does nothing to expand the opportunity for kids to go to college,” said Rep. Rob Bishop, Utah Republican.

“[The interest rate] is only cut in half for a six-month period,” said Rep. Howard P. “Buck” McKeon, California Republican.

Democrats said the legislation is just the first step toward making higher education more affordable and that they plan other measures, such as increasing the maximum Pell Grant award.

Mr. Miller said students overwhelmingly support the bill. “Hey a novel idea: Let’s do something the students like,” he said.

Sen. Edward M. Kennedy, Massachusetts Democrat and chairman of the Health, Education, Labor and Pensions Committee, said the Senate will debate the issue soon.

An Office of Management and Budget memo this week argued that the bill could drive up tuition costs by encouraging more student debt. But the White House stopped short of a veto threat, saying the Bush administration would support grants for low-income students and work with Congress on a “comprehensive approach” to improving access to higher education.

Both Republicans and the White House stressed that education institutions need to join the effort.

A more expensive version of the House bill that Democrats introduced last year would have cut student loan rates for more people, including graduate students and parents. The current bill is expected to cost about $6 billion over five years.

Rep. Phil Gingrey, Georgia Republican, said the idea was good for a “quick sound-bite” on the campaign trail but that 90 percent of the promises have disappeared.

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