WASHINGTON - A majority of the House Budget Committee is objecting to a provision in the budget and tax package that would eliminate the need for tax-exempt student loan bonds by scrapping the current college-aid system, congressional aides said yesterday.
Ten Democrats and 13 Republicans on the 43-member budget panel last week signed on in support of a statement by 10 education lawmakers opposing the proposed direct-loan program and urging that it be removed from the package when the House votes on the bill later this week, the aides said.
But the lawmakers' objection did not stop the committee from sending the budget and tax package to the House floor. The panel approved the measure last week by a vote of 26 to 17.
But their opposition is evidence of what some education lobbyists say is a significant amount of opposition in the House to the direct-loan plan, which would shift responsibility for making and servicing student loans away from banks and onto colleges. The lawmakers are not sure the provision is cost effective and fear Congress is moving too quickly to implement it.
Meanwhile, Rep. Bart Gordon, D-Tenn., a member of the House Education Committee, announced he would try to offer an amendment on the House floor that would strip the direct-loan provision out of the budget and tax package.
Whether Gordon will be allowed to offer the amendment depends on the House Rules Committee, which clears all bills for House floor action. That panel is scheduled to meet Wednesday to determine which, if any, amendments will be permitted to come up in floor debate.
Under current law, the federal government guarantees loans made to students by commercial banks, which in turn sell the loans to state higher education authorities. The authorities often finance those purchases with tax-exempt bonds. Education lobbyists say that switching to a direct loan program will eliminate the need for the state authorities and, in turn, for student loan bonds.
The provision in the budget and tax package would require the federal government, beginning in 1994, to provide seed money to colleges to set up revolving loan funds for student aid. The program would be phased in over five years.
The direct-loan plan originated earlier this month in the House Education and Labor Committee, which was responding to a directive from the budget panel to find at least $4.5 billion in savings among programs under its jurisdiction. The General Accounting Office has estimated that replacing the current system with direct lending would save the federal government more than $6 billion.
But in their statement, the budget and education legislators said they believe a direct-loan program does not need to be implemented because "savings as well as dramatic program simplification can be found in the current program."
The legislators added that they have "very serious questions about the savings estimates associated with direct loans."
Last year, Congress had planned to move much more slowly on the direct-loan front, passing legislation that is supposed to test the concept over a four-year period beginning in 1994. In their statement, the legislators said Congress should stay on that course, and not rush into a direct-loan plan.
"Until direct loans are tested, they are just a concept," the legislators said. "Given the magnitude of our student-loan program, we believe it makes far more sense to test direct [lending] first to make sure it lives up to its promise."