WASHINGTON - Bolstering the banking industry's case, a new survey found that the public prefers to get student loans from private sector institutions than from the government.

The survey, sponsored by the Coalition for Student Loan Reform, found that 72% of the public believes banks and other private lenders should make higher education loans. The poll was based on interviews with 1,000 randomly selected individuals.

"The poll results don't surprise me at all," said Rep. Lindsey Graham, a Republican from South Carolina who sits on the House Economic and Educational Opportunities Committee. "I wouldn't want a bunch of educators in the Department of Education to run the bank."

Sixty-two percent of respondents said the private sector can distribute funds more effectively and provide better customer service than the federal government.

The Department of Education is currently engaged in a test to determine if the government can manage the student loan program more cheaply than the private sector.

While President Clinton has called for the expansion of the direct loan program to serve 100% of the market, current law states that the government-run program can take over only 60% of the market by 1998.

Rep. Bart Gordon, a bank industry ally on this issue, said student loan programs should not be run by the Department of Education.

"It simply makes no sense to go forward with this," said the Tennessee Democrat, who helped work out the compromise limiting the reach of the program. "The Department of Education has got its hands full."

However, Leo Kornfeld, senior adviser to Education Secretary Richard W. Riley, pointed out that the survey also said 60% of those polled had not heard about any of the proposed changes in student loan programs.

"If I asked you would you rather have a private company or the government make you a loan, you'd probably say a private company too," Mr. Kornfeld said. "Why didn't they ask the 350,000 students who are part of the direct loan program?"

Mr. Kornfeld argued that the survey "lacks credibility" because it was sponsored by a group that opposes the direct student loan program.

The Coalition for Student Loan Reform is a group of state and nonprofit loan guarantors and secondary markets organizations. The survey was conducted by GOP pollster Frank Luntz.

The House Economic and Educational Opportunities Committee on July 26 is expected to take up legislation that would cap the direct loan program at 40% of the market.

Separately, the House Appropriations Committee on Tuesday approved a spending bill that would reduce the amount of funding available to administer the federal direct loan program.

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