Bush To Cut Student LoanSubsidies
WASHINGTON - (02/07/05) -- President Bush's 2006 budget willpropose a $15 billion increase in guaranteed Pell grants tolow-income students and billions of dollars in subsidy cuts tocredit unions and bank participants in the guaranteed student loanprogram to pay for the funding increase. The fiscal year budget tobe presented to Congress Monday includes reductions in thereimbursement rate to lenders on student loan defaults andincreases in the fees charged lenders for loan consolidations. TheAdministration will also call for an end to a loophole in theguaranteed student loan program that allows some lenders to recovera 9.5% guaranteed rate of return on some loans. A one-yearmoratorium on the practice expires in September. The proposedbudget cuts in the student loan program come as hundreds of creditunions are either trimming back or eliminating altogether thestudent loan programs in the face of rising competition from suchgiants as Sallie Mae, JP Morgan Chase or Citibank.