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House, for the Second Time,

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.

Interest rates on Parent Loans for Undergraduate Students will increase to 8.5 percent, more than 1 percentage point above current rates.

“The massive education cuts by Congress don’t just hurt students, they hurt our national standing in the global economy,” says Reg Weaver, president of the National Education Association.

Among other provisions, the bill would cut subsidies to lenders and require many borrowers to pay a fee to loan guarantee agencies. The measure also would raise loan limits so students can borrow more money for college.

A key Republican leader says the plan provides fiscal restraint for an out-of-control process. “[This] vote demonstrates our willingness to make the difficult choices that ensure we won’t leave our budget woes for our children and grandchildren,” said Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce and recently elected House majority leader, replacing Rep. Tom DeLay, R-Texas.

As House majority leader, Boehner must relinquish his chairmanship of the committee.

“I would be remiss if I did not acknowledge that today is a bittersweet day for me. I consider myself extremely blessed to have served as chairman of the Education and the Workforce Committee these last five years. I’m lucky to have worked with such a great staff and fantastic members, and I look forward to continuing my work with them as majority leader,” Boehner said after winning the position.

But Democrats say the GOP will use the savings to enact more tax cuts for wealthy Americans as soon as late February.

While the bill primarily cuts spending, one provision would create a new higher education grant program. This initiative would target students who have high GPAs and who have studied a rigorous high school curriculum. With its merit emphasis, however, student groups say the new program may not broaden college access for at-risk students.

To underscore his commitment to rigor, President Bush also is proposing a new initiative to increase student achievement in math and science. Included in his 2007 education budget, the president is proposing $400 million as a down payment on new math and science education initiatives, including math focus programs for elementary and middle school students. The plan also would train another 70,000 additional Advanced Placement high school teachers.

The proposals are part of an American Competitiveness Initiative funded at $5.9 billion in 2007 and $136 billion during the next 10 years. Much of this commitment — $86 billion — is done by making permanent a federal research and development tax credit. The plan also would double federal research funds on physical sciences.

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