GOP will not hurt student loans

Paying back student loans may not be as difficult as Congress had threatened earlier this year. House and Senate Republicans agreed last week not to increase the cost of student federal loans. However, the decision is contingent upon passage of the federal budget, which President Clinton has threatened to veto. "It's heartening to see the federal government not take away from students," Executive Vice President John Fry said. Under the new Republican agreement, there will be a $4.9 billion cut that will hit only banks and guaranty agencies that run the federal loan program. Originally, House Republicans sought a $10 billion cut that would have affected students. In addition, Stafford Loans will not be impacted by the new Republican plans. "We are obviously very pleased that Congress has decided that [student loans] isn't the place to solve the deficit," Associate Vice President for Finance Frank Claus said. But paying back loans may still become more difficult -- even with the revised GOP budget plan, said David Morse, assistant vice president for policy planning and federal relations. "One problem is the projected increase in the interest rate for parent loans," Morse said. "Thus, parents would be forced to pay more money." Parent loans are loans taken out by parents in addition to the amount a student can borrow. Morse also pointed out that the Republican budget shifts away from a direct lending program started by Clinton two years ago. The University is not a direct lender and would not be affected by cuts, but many other institutions have had success with direct lending. The Clinton program calls for students to get their loans directly from the federal government through their university instead of going through a bank. "Many Republicans, with few exceptions, do not think direct lending is a good idea," said Morse. "As of September 1995, 40 percent of the loan volume in student programs is projected to be in direct lending. A Senate plan would cut this to 20 percent and a House plan would cut direct lending entirely." Morse warned that Clinton has said he will veto the budget if direct lending is at 20 percent or less. Clinton believes that students should have the choice to participate in direct lending programs. If Clinton vetoes the budget, government would be forced to shut down until an agreement is reached. Currently, the House and Senate are debating a resolution that would allow most government programs to be extended for a certain length of time while the budget debate continues. The Associated Press contributed to this article.