Congress could cut $15 billion in student loans

Bills in the U.S. House and Senate could cut as much as $15 billion from federally subsidized student loans in an effort to reduce spending. \nThe House could meet as soon as this week to vote on a version of the bill, which is expected to reduce federal entitlement spending by $50 billion, including student loan subsidies. \nSubsidized student loans, such as Stafford loans, are interest-free and given to students on the basis of financial need.\nNearly two weeks ago, the House Committee for Education and the Workforce passed a bill which would cut $14.5 billion in programs over five years. Most cuts come through a reduction in federal subsidies to private loan providers. The loan providers would also receive a 9.5 percent drop in returns from student loans.\nThe committee bill also decreases the fees students pay for loans, from 4 percent to 1 percent, and increases the student loan limits for first- and second-year students, from $2,625 to $3,500 and $3,500 to $4,500, respectively. Graduate student borrowing limits will increase from $10,000 to $12,000.\nThe education committee's proposals are expected to be included in the larger House Deficit Reduction Package, although the bill is not complete, and it is still unclear what it will entail. \nCam Savage, a spokesman for U.S. Rep. Mike Sodrel, R-Ind., who represents the Bloomington area, said the congressman will not make a decision on how he will vote on the bill until it is formally submitted to the House floor and all of its contents are known. But he said the bill, with the education committee's proposals, would likely have only a minimal effect on students. \n"The individual student is going to see very little change at all here," Savage said. "What it's going to do is allow lenders to increase loan limits and reduce some loan fees. The individual student is not going to see much of an impact here."\nYet critics say the changes could negatively affect students if fewer loan providers remain in the business or if those providers pass fees onto students themselves. \nBill Ehrich, associate director for client services at the Office of Student Financial Assistance at IU, said with changes in subsidized loans under the proposed legislation, banks would get less of a subsidy but would still want to keep the same profit levels. The difference would likely be made up by students and would make college less accessible, he said. \n"Bankers aren't going to lose money," he said. "They're going to be less and less willingly to make deals that benefit students."\nOn Thursday, the Senate passed the Deficit Reduction Act, which will cut $35 billion over five years to a variety of programs, including higher education. The Senate bill would also reduce fees students pay for loans to 2 percent and would make cuts in subsidiaries to government loan providers, although the bill calls for the creation of an $8.25 billion increase to Pell Grant recipients. \nThe Pell Grant increases are unlikely to pass when the Senate and House come together, though, said Susan L. Pugh, associate vice chancellor for enrollment services at IU. \n"I don't think anybody is going to pass additional money right now because they have to have a way to pay for it," she said. \nStudents have organized campaigns to fight possible cuts in aid, said Christine Jack, public relations coordinator for the Indiana Public Interest Research Group.\n"It's a hard issue for everyone to understand," she said. "Education should be affordable for everyone. No one should cut financial aid out of anyone's life because everyone needs it." \nINPIRG held action rallies to raise awareness of student debts and campaigns to oppose the congressional bills, Jack said. \nBut University officials say the bills are still far from being completed, with multiple changes expected before any legislation reaches President Bush's desk. \n"When you're dealing with Congress nothing is sure until you see the final bill," Ehrich said. "I've been around long enough that I don't get wildly excited at this point"