Even though lawmakers moved to soften the blow of recent interest rate cuts in the student loan market, many bank lenders may find it too difficult to stay in the business.

Under legislation passed last week by the Senate, following the lead of the House two months earlier, banks in the government-guaranteed loan program will receive a permanent federal subsidy to partially compensate for an 80-basis-point rate cut that took effect for students on July 1.

"We're pleased this has been resolved, but the interest rate cut is going to cause major changes," said Mary F. Bushman, a lobbyist with AFSA Data Corp., the student loan unit of Fleet Financial Group. "This is the largest cut ever experienced by lenders in the program."

Even after the subsidy, the rate lenders earn has fallen to 7.93%, from 8.23%.

A temporary subsidy had been in effect since July 1. The permanent subsidy, included in a higher-education spending bill, would provide a 50- basis-point payment to lenders.

Without the government payments, private lenders would stop making the guaranteed loans, industry officials said. Ms. Bushman predicted some lenders will still flee the business or try to drive down costs by selling more loans to Sallie Mae and other servicers.

Joe Belew, president of the Consumer Bankers Association, warned that major education lenders will be forced to close telephone customer service centers.

Jon A. Veenis, president of the Norwest Student Loan Center in Sioux Falls, S.D., said large-scale lenders have gained a bigger advantage over smaller ones.

"We have economies of scale and greater ability to use technology to drive down costs over time," he said.

The Clinton administration has dismissed bankers' complaints, arguing that they already make too much money from student loans. In a statement Friday, President Clinton vowed to keep fighting the subsidy when lawmakers meet to settle differences between the House and Senate bills.

"There are still serious fiscal and policy issues that need to be resolved," he said.

Congressional sources said there is little chance of changing the subsidy provision because the bills are nearly identical on that point.

The huge victory margins-the Senate vote was 96 to 1, the House 414 to 4-appear to have taken the wind out of the veto threat the administration made in April.

Senators voted down two Democratic amendments that lenders opposed. One would have required a pilot program to test whether rates could be set by auction. The other would have reduced the origination fees that students pay for government-backed loans.

An amendment to let some nonprofit organizations originate student loans was withdrawn.

Bankers are hoping to tweak a Senate provision that would require them to provide schools with addresses of delinquent borrowers. "We think it would be less burdensome on banks if they were required to provide this information only to schools with high default rates," Mr. Belew said.

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