House OKs bill slashing rates on student loans

Published: Thursday, January 18, 2007 at 6:01 a.m.
Last Modified: Wednesday, January 17, 2007 at 11:47 p.m.

WASHINGTON — The Democratic-controlled House voted overwhelmingly to cut interest rates on need-based student loans Wednesday, steadily whittling its list of early legislative priorities.

The strong bipartisan vote in the House came as a dispute between Republicans and Democrats in the Senate derailed ethics and lobbying reform that the new Democratic majority had made their first legislative initiative.

The House legislation, passed 356-71, would slice rates on the subsidized loans from 6.8 percent to 3.4 percent in stages over five years at a cost to taxpayers of $6 billion. About 5.5 million students get the loans each year.

Though clearly popular, the bill sparked a debate over where to set the nation's education priorities — helping college grads pay off their debts or expanding federal grants for low-income students.

Democrats conceded Congress needs to do more to make college more affordable. But they said reducing student loan rates was a significant step toward tuition relief.

"Many young people find themselves where I was when I was at age 18, wondering what they will do with their lives," said Rep. Linda Sanchez, D-Calif., a daughter of immigrants who is still paying off her student loans. "To those students, especially those whose parents didn't go to college, the prospect of student loan debt is frightening."

The Bush administration opposes the bill and Senate Democrats plan to bring up a more comprehensive bill that could complicate its prospects

The House bill aims to reduce the $6 billion cost by reducing the government's guaranteed return to lenders that make student loans, cutting back the amount the government pays for defaulted loans and requiring banks to pay more in fees. Lending institutions opposed the bill.

"A strategy of raiding a financial aid program to fund modest proposals is inadequate to the challenge," said Kevin Bruns, executive director of the America's Student Loan Providers, a group that represents leading lenders.

While the legislation matched the Democrats' pledge to pass a student loan measure in the first 100 hours of legislative action by the new Congress, it fell short of their broader goal of lowering interest rates for parents who take out college loans for their children.

During the 2006 congressional campaigns, Democrats also said they wanted to increase the maximum Pell grant award from $4,050 to $5,100. Pell grants go only to the neediest students and do not have to be paid back.

"We want to increase the Pell grant," said Rep. George Miller, D-Calif., chairman of the Education and Labor Committee. "We hope to be able to enlarge the tax deductions for parents paying for tuition and the cost of college beyond that."

"So, yes, in this 100 hours, this is what we can do," he added. " This is what's affordable."

Republicans argued that Democrats had chosen a politically expedient way to make good on a campaign promise instead of finding ways to increase federal college grants to help the poor meet rising college tuition.

"It is a whoop-de-doo bill," said Rep. Rob Bishop, R-Utah. "But to be honest, what it does for my kids in college is nothing. What it does for the friends of my kids in college is nothing. What it does for the students I taught in high school and are still in college is basically nothing when it could have done so much more."

Still, 124 Republicans voted for the bill.

In the Senate, lawmakers struggled with ethics legislation that would govern lawmakers and lobbyists and worked to broaden earlier House-passed legislation on the minimum wage. At the same time, a bipartisan group of senators announced a nonbinding resolution opposing President Bush's planned troop buildup in Iraq.

"U.S. strategy and presence on the ground in Iraq can only be sustained with the support of the American people and the bipartisan support of the United States Congress," the resolution states. It was written by Sens. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee, Joseph Biden, D-Del., chairman of the Senate Foreign Relations Committee, and Sen. Chuck Hagel, R-Neb., a longtime critic of Bush administration policy in Iraq. Sen. Olympia Snowe, R-Maine, said she would join the resolution as a co-sponsor.

The war and reaction to Bush's proposal to raise troop levels by 21,500 soldiers was overshadowing the Democrats' carefully planned strategy to move popular domestic policy initiatives and rack up a list of accomplishments.

House Speaker Nancy Pelosi is waiting to see what the Senate would pass before taking up a resolution in the House. But Democratic leaders face pressure from some House Democrats to take stronger measures to oppose Bush.

Meanwhile, the Senate moved closer toward passing legislation that would raise the minimum wage from $5.15 to $7.25 over the next two years and give tax breaks to small businesses. The Senate Finance Committee on Wednesday approved by voice vote a series of tax provisions to help restaurants, retailers and employers who hire welfare recipients and hard-to-employ workers such as ex-convicts and the disabled.

The House passed a minimum wage bill without the tax provisions last week. The Senate is expected to begin debate on the legislation next week.

The ethics and lobbying bill that the Senate has been debating for more than a week hit a momentary snag Wednesday when Republicans indicated they would vote against proceeding with the legislation unless they got a vote on an amendment giving the president authority to single out individual spending items in legislation for elimination.

"It's very clear the minority doesn't want a bill," said Majority Leader Harry Reid, D-Nev., in an angry floor speech. But Reid also promised the author of the amendment, Sen. Judd Gregg, R-N.H., that he would get a vote on his proposal before the Easter recess if he withdrew it from the ethics bill, leaving the door open for a deal.

In the House, Pelosi moved to put global warming at the top of the Democratic agenda, shaking up traditional party hierarchies and creating a special committee that will recommend legislation addressing climate change. The new panel would be chaired by Rep. Edward Markey, D-Mass., an influential Democrat and longtime critic of oil companies and automakers.

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