Tis The Hour for the House To Study Student Loans
Wednesday, January 17, 2007SUSIE GHARIB: The House of Representatives is heading towards the finish line of its first 100 hours. Today, the House passed a key item on its agenda: a bill that would cut interest rates on student loans in half. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The typical college student graduates with $17,500 in student loan debt. Nkiru Nnawulezi is helping pay for her college tuition with student loans. She likes the idea of a lower interest rate.
NKIRU NNAWULEZI, COLLEGE STUDENT: Anything to make things easier on the students and help out education, I think is important.
DHUE: That's just the kind of reaction Democratic supporters are counting on. Congressman Tim Bishop says the proposal will make college affordable to more Americans.
REP. TIMOTHY BISHOP (D) NEW YORK: High indebtedness scares people off. High monthly obligations once they graduate scares people off and what this legislation does is it targets it.
DHUE: The legislation would phase in interest rate cuts on subsidized Federal loans for undergraduate students from the current 6.8 percent to 3.4 percent over five years. To comply with budget rules, the rate cut reverts to 6.8 percent in 2012. To offset the nearly $6 billion cost to the government, the proposal increases fees charged to lenders. The financial aid director at American University, Brian Lee Sang, says while students will benefit, the impact is limited.
BRIAN LEE SANG, FINANCIAL AID DIRECTOR, AMERICAN UNIVERSITY: It is a good thing that students are getting this sort of interest-rate cut, but in terms of paying for school right now, the maximum loan amounts are exactly the same, the aid that's available is exactly the same.
DHUE: Critics say the proposal won't help the neediest students. Republican Congressman Buck McKeon says a better approach would be to increase Pell grants.
REP. BUCK MCKEON (R) CA: Why don't we put those resources to those students that are trying to get into college rather than give a bonus to those who have graduated and are now going to repaying a loan?
DHUE: But some doubt increasing Federal aid will lower college costs. Over the past six years, Federal spending on student aid has increased by 57 percent. Brian Riedl is with the Heritage think tank.
BRIAN RIEDL, HERITAGE FOUNDATION: Historically, student aid increases have led colleges to increase tuition, because once students have more funds, they'll capture it in higher tuition.
DHUE: The bill now moves to the Senate, where it faces an uncertain future. Senator Ted Kennedy wants to expand the bill, but it's unclear if there are the votes to support that kind of measure. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
