Senate postpones decision on loans

Republicans back off on tax proposals Senate Republicans are looking for a new way to cut $10 billion of student financial aid from the national budget. Senator Nancy Kassebaum (R-Kan.), chairperson of the Senate Labor and Human Resources Committee, postponed Friday the vote scheduled for Wednesday on the budget because of concern expressed by other senators about the proposed increase of interest on student loans. "A number of Republicans defected from her with the previous proposal," said David Morse, assistant vice president for policy planning. The original House proposal required institutions to pay a 2 percent tax on the total volume of their student loans. The tax has since been reduced by the Senate to .83 percent. The reduced tax would cost the University $600,000 a year if it is made law, Morse said. But any kind of tax on the University's student loan volume will affect the educational services that are provided to students, he added. The University has been talking to staff members of the two Pennsylvania senators in addition to key Republican committee members about eliminating the tax proposal. To compensate for the loss of revenue from the lower tax, the six-month grace period in which the government pays for a student's loan interest would be eliminated. The six-month grace period had already been cut to four months in the initial proposal, according to Morse. This budget cut would directly affect students who have been able to borrow more money under the federal guaranteed loan program. An estimated $24 billion was borrowed for college expenses in 1995 -- an increase of 50 percent since 1992. According to the Education Resources Institute, the Republican budget cuts in conjunction with the growing loan volume might negatively affect the economy -- since students will have a limited buying and saving power. But college loans are only a small fraction of the loans most Americans take on. "The concern we all share is that the cost of money is going to get more expensive for everybody," said Carol Scheman, vice president for government, community and public affairs. A study by the Institute found that some students do not understand their loan commitments and as a result take on too much debt. According to Scheman, the University compiles a financial aid package and then provides adequate counseling for students to explain the package.

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