House, for the Second Time,
Approves Controversial Budget Bill
Supporters say cuts will control runaway spending; critics say college access will be harmed.
by Charles Dervarics
After a month-long delay, the U.S. House of Representatives earlier this month gave final approval to a controversial budget bill that will slash nearly $13 billion from student loan programs and that may raise interest rates for student and parent borrowers.
The House and Senate narrowly approved the plan in December, but Senate Democrats in a late parliamentary maneuver forced the House to vote on the measure again (see Diverse, Feb. 9).
The legislation will be sent to President Bush, who is waiting to sign the plan. Overall, the bill would cut $39 billion from Medicaid, child support enforcement and other programs, with student loans accounting for about one-third of the reductions.
Supporters of the plan say it will begin to control runaway federal spending, while critics say it will harm college access and disproportionately hurt low-income students.
“Instead of investing in higher education and the future of our country, Congress passed legislation that puts college even further out of reach for America’s families,” says Eddy Morales, president of the United States Student Association.
Borrowers are likely to see the effects because they may no longer have access to market-rate loans and instead would face more expensive fixed-rate borrowing. One of the first changes will come in the form of a fixed 6.8 percent interest rate on Stafford Loans. Many students currently pay less than 5 percent.
