WASHINGTON -- The House this week signaled its displeasure with the rush by some education lawmakers to enact a system under which student loans would be made by colleges and student loan bonds would no longer be needed, lobbyists say.
Until now, lawmakers have had no chance to cast a separate vote on the proposal for so-called direct lending because it is buried in the huge budget and tax package. That package has passed both houses, which are expected to begin reconciling their differences on the measure later this month.
But on Wednesday, when the House debated an appropriations bill for the Department of Education, Rep. Bart Gordon, D-Tenn., offered an amendment to restrict the amount the agency would be able to spend on direct loans next year if such a program is enacted. The house overwhelmingly approved the amendment by a vote of 397 to 28.
Education lobbyists who oppose the direct loan proposal acknowledge that the amendment would have little practical effect because it would not stop direct lending from being enacted. But they are hailing the vote as a symbol of the House's discontent with the idea of direct lending.
"We're very pleased there [could] be some sort of vote to indicate some real unease" among House lawmakers with direct loans, said Laurie Quarles, the deputy director of the National Council of Higher Education Loan Programs.
John Dean, a lawyer who represents the Consumer Bankers Association, said approval of the amendment sends a message to Rep. William Ford, D-Mich., chairman of the House Education and Labor Committee, which originated the direct lending proposal.
Ford is a strong supporter of direct loans and will be leading the charge in the House-Senate conference to keep them in the final bill.
The vote "means that Chairman Ford will be aware that an overwhelming majority of the House has concerns about direct loans and is not supportive of the proposal."
Dean, who is also a partner in the law firm of Clohan & Dean.
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 funds 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 switch-over to direct loans by 1998.
The Senate's bill would also phase in direct lending, but 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.
Gordon's amendment would restrict amount of money spent on direct lending in the first year after enactment to the amount already provided for under the pilot program.
In practical terms, such a restriction is meaningless, because both the House and Senate direct loan proposals cap first-year spending at an amount roughly equivalent to the level in the pilot program.
But Gordon said he offered his amendment because he believes education conferees need to know that House members "want to stick with the pilot project included in the Higher Education Act last year."
