WASHINGTON Rep. Howard P. Buck McKeon, R-Calif., has introduced a bill intended to encourage bankers to stay in the student loan business.
The bill would forestall a provision of the Higher Education Act that is to change the method for calculating the maximum interest rate that private lenders may charge on government-guaranteed loans after July 1, 2003. Industry experts estimated last year that the change could cost banks $1 billion per year.
Officials at the Consumer Bankers Association said that unless Rep. McKeons bill is passed, the new formula will be make profits too volatile and prompt lenders to get out of the business. The bill would keep the current formula in place for 10 years.