- The Washington Times - Wednesday, December 21, 2005

BLOOMBERG NEWS

The Senate yesterday approved legislation that reduces spending on federal college loan programs and steers more students toward using private lenders instead of borrowing directly from the government.

The measure passed as part of a package of $39.7 billion in spending cuts over five years. About $12.7 billion of the cuts are from education programs.

The Senate passed the overall plan on a 51-50 vote with Vice President Dick Cheney, in his role as president of the Senate, casting the tie-breaking vote.

The vote for passage followed a successful procedural objection raised by Democrats that forces the measure to be sent back to the House before it goes to President Bush to be signed into law.

The education provisions revise “outdated entitlement programs that aren’t meeting the needs of those they are supposed to serve,” House Education and the Workforce Committee Chairman John A. Boehner, Ohio Republican, said in e-mail Monday.

The U.S. government last year helped college students borrow about $84 billion, mainly through programs that either guaranteed the repayment of money loaned by private lenders or allowed students to take out federal loans. Backing private loans costs the government five times more per dollar loaned than distributing the money directly, according to a Government Accountability Office audit released Oct. 25.

The measure passed by the Senate also repealed a rule that left colleges and universities ineligible for federal student loan programs if they offered more than 50 percent of their courses over the Internet.

The legislation to trim federal spending on student-loan programs was a compromise between a reduction of $14.3 billion over five years in the House measure and $8.8 billion in the Senate’s original version.

The compromise still creates $3.7 billion in scholarship money, though with conditions giving priority to certain students, such as those majoring in math, science or foreign languages deemed critical to national security.

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