WASHINGTON -- A majority of House members yesterday sent a letter to education conferees urging them to reject a House proposal that would scrap the current college loan system and the need for student loan bonds by 1998 in favor of a program of direct lending by colleges.
In a related development, Senate majority leader George Mitchell, D-Maine, pressed the top Senate education conference, Sen. Edward Kennedy, D-Mass., to put aside his preference for moving quickly to direct lending and push hard for a Senate proposal that would move more slowly than the House to institute the new system.
The calls for moving slowly on the direct-loan front came as education conferees were to begin substantive negotiations last night toward a final bill. The bill will be rolled into the larger budget and tax package on which a vote in both houses is expected next week.
The House members' letter follows a vote in the House on July 1 in which members first signaled their displeasure with the House student loan proposal.
By a vote of 397 to 28, the House added an amendment to an appropriations bill that would restrict the amount the federal government would be able to spend on direct loans next year if such a proposal were approved. The amendment would have no practical effect because it does not stop direct lending from being enacted.
But in their letter, 260 House members from both parties said the vote shows "the concerns which many of us have about moving to a full-blown direct lending program without first testing a substantial pilot."
Rep. Bart Gordon, D-Tenn., who sponsored the appropriations amendment, said the letter demonstrates to the conferees that "the will of the House on how to proceed with the future of the federal student loan program is clear."
Under current law, the federal government guarantees loans made to students by banks, which in turn sell the loans to state higher education authorities. The authorities often finance their purchases with tax-exempt bonds.
Last year, Congress approved legislation creating a pilot program to test the direct loan concept over the next four years. Under direct lending, the federal government provides seed money to colleges to set up revolving loans for student aid.
But the House version of the budget and tax package passed in May would go a step further by phasing out the current system and mandating a switchover to direct loans by 1998.
The Senate's bill would also phase in direct lending, but would limit the amount of direct loans to 50% of total federal student loan volume by 1998. In that year, Congress would have to decide whether to change over to full direct lending or stick with the current system.
In a July 20 letter to Kennedy, Mitchell said the Senate's bill "would allow minimal yet sufficient time to gauge whether converting our federal loan program is in the best interest of students and taxpayers."
Mitchell said he still believes that "we should test direct loans in the marketplace before forcing all students and schools to participate in an unknown program." He also wrote, "The Senate cap placed on direct loan activity in the near term makes good sense until we have better information on these issues."
Mitchell sent the letter because Senate leaders are concerned that Kennedy, an advocate of moving quickly to a direct lending program, may not fight hard enough for the Senate's proposal.
"There was some question about Kennedy's own commitment to the compromise reached in the Senate," an education lobbyist said. The letter "was an effort to stiffen Kennedy's backbone in the conference."