WASHINGTON -- The Senate Labor and Human Resources Committee yesterday unanimously approved a comprehensive education bill, but blocked attempts to add a provision that would have revamped the college financial and system and eliminated the need for tax-exempt student loan bonds.
The Senate panel's bill is at odds with the version passed last week by the House Education and Labor Committee, which would phase out by 1996 the current system of federally guaranteed bank loans in favor of a direct-loan program financed by the federal government.
The comprehensive education legislation is needed to reauthorize the Higher Education Act of 1965. Congress must complete work on the reauthorization by the end of next year.
Once the full House and Senate pass their respective versions of the bill, the issue of whether the final package will contain a direct-loan program will have to be resolved when the two houses meet sometime next spring to resolve their differences and craft a final package.
Sen. Paul Simon, D-Ill., a member of the Senate panel, has tried without success to persuade fellow committee members to support his call for direct loans. A spokesman for the committee said the panel plans to hold hearings on his plan, even though the panel has already voted.
The federal government currently 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, and some operate bond-financed loan programs of their own to supplement the federal system.
The program approved by the House committee would require the federal government to give seed money to colleges to set up revolving loan funds for student aid. State education officials have said such a program would obviate the need for their student loan agencies, and in turn, for issuance of student loan bonds.