House bill should ease glut of student loan help requests

Medill News Service WASHINGTON (U-WIRE) -- The House Education and the Workforce Committee unanimously approved a bill Wednesday that would alleviate a backlog of more than 84,000 federal student loan consolidation requests resulting from a law intended to simplify and speed the college loan process. The bill is a direct response to Education Department administrative problems created by the 1996 Direct Loan Consolidation program, which allows students and recent graduates to simplify their bookkeeping while offering a variety of payment options. Last month, the department put a freeze on new applications and announced that more than 84,000 applications were backlogged. The emergency bill would allow immediate consolidation of federal student loans through a separate program within the Department of Education -- Federal Family Education Loans -- for one year. Unlike the direct loan program, which bypasses banks to give students' loan money directly to their schools, FFEL loans are processed through banks and creditors. Republicans in Congress have blasted the direct loan program almost since its inception, calling it an inefficient example of government waste. The new bill would move processing of the direct loan consolidation requests to FFEL for one year. Both FFEL and Direct Student loans would enjoy federal interest rates equivalent to those of the Direct Loans during that year. Students could seek consolidation through local institutions without the red tape of the overburdened government office. The bill is scheduled to come before the complete House of Representatives on October 20 under procedural rules that allow certain bills to get speedy consideration. The measure could be signed into law as early as November 1 if the Senate passes the measure in time, but its proposed funding is expected to create some controversy there. "The act will help students who are currently unable to consolidate student loans," said Rep. Howard McKeon (R-Calif.) "I have total lack of confidence in the Direct Loan Program." The Emergency Student Loan Consolidation Act would cost an estimated $25 million, and the money would be taken from the administration funds for the Direct Loan and FFEL programs. With a total loan administration budget of $532 million, some fear the cuts would send the Direct Loan program into further crisis. The debate over the Direct Student Loan Program is expected to continue in the coming year. The Education Committee is expected to recommend replacing Department of Education administration of the federal loan programs with a separate entity within the department that would operate like a private contractor as part of the 1998 reauthorization package.