President Bush and Democrats Tangle Over Student Loan Cuts
WASHINGTON – The new Democratic majority is expected to approve a bill today that would cut interest rates on guaranteed student loans in half, at the expense of banks, credit unions and other student lenders. The measure would reduce the rate on subsidized Stafford loans from 6.8% to 3.4% over the next four years and put new pressures on the few credit unions that continue to participate in the guaranteed loan program. Under the Democrats’ plan the $6 billion in estimated savings for students would be made up in higher fees on participants in the student loan program. President Bush says he is opposed to the Democratic bill, saying he believes it will encourage even more borrowing by debt-laden students. Hundreds of credit unions have abandoned the student loan program over the past five years as the market has become increasingly dominated by huge layers, including Salle Mae, the former government sponsored enterprise that has become the leading provider of student loans.