Congress moves to cut college loan costs

"This proposal does nothing to encourage colleges and universities to keep tuition costs under control," says Ed Patru, communications director for the House Republican Conference. "Instead it creates an incentive for them to raise tuition and fees."

The measure is likely to pass in the House. But, its chances in the Senate, where Democrats hold only a slim majority, is less certain.

Sen. Ted Kennedy (D) of Massachusetts has supported the House bill, but also has his own, more comprehensive measure he'd like to push through.

Senator Kennedy's bill would halve interest rates on more than just the Stafford loans, raise the Pell Grant limit to $5,100, cap federal student loan payments at 15 percent of a borrower's discretionary income, forgive the debt for those who stay in public service careers, and encourage schools to use the government's less costly Direct Loan Program.

Some backers of the interest-rate cuts worry that tying so many other measures to it will make it harder to get anything passed, but others say that such a comprehensive plan would be far more meaningful for students, especially for the low-income students for whom college still seems an unaffordable goal.

"The positive thing about having the Miller bill on the table is that it does provide an opportunity to revisit some of these issues, including the grant programs," says Lois Dickson Rice, a guest scholar in the economic studies program at the Brookings Institution, referring to Rep. George Miller (D) of California, who is leading the charge on interest rates. "There's no question that [cutting interest rates] is some attempt to try and address this issue of college access and affordability, but this is sort of a baby step in that direction."

Ms. Rice would like to see the Pell Grant limit not only raised, but also have it retargeted at the neediest of students, and have other options – like expanding the repayment period on loans or making college tax credits refundable – put on the table.

Students themselves, meanwhile, are advocating fiercely for the Housebill, seeing it as a sign of a big change in how Congress – which a year ago took $12 billion from student loan programs to help pay for tax cuts – views their needs.

"College should be affordable for students, and for the future of our country, this is important," says Trevor Montgomery, a senior majoring in political science at the University of Illinois in Chicago, who will graduate with about $20,000 in student loans. If it passes, the bill won't affect him, since he's already graduating, but Mr. Montgomery says he can already see what a difference it would make if it does.

"I'm starting the job search process thinking about the $20,000, thinking about how much that's going to cost, and it's playing a huge part," he says. "Some of the jobs I want the most are paying salaries on the borderline of being able to survive on with that. It stinks to have to consider those things."

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