House Backs Increasing Student Loans

Loan industry groups said the subsidy cuts would be particularly harmful to small lenders. In addition, Sallie Mae disclosed yesterday that private investors are citing the subsidy cuts as a possible reason to back out of a deal to take over the Reston-based lender.

"Today is a sad day for most student loan borrowers and their families," Joe Belew, president of the Consumer Bankers Association, said in a statement. "Under the terms of the bill, loan costs will go up for more than 6.5 million borrowers, many of whom are middle-income Americans already struggling to meet the rising cost of college."

But Michael Dannenberg, director of the education policy program at the New America Foundation and a former Democratic aide on the Hill, said loan companies would remain profitable.

"I think this is a case of the boy who cried wolf," he said. "The truth is that the student loan industry is one of the most lucrative industries in America."

The legislation includes other provisions to overhaul student loan programs. It would prevent borrowers from paying more than 15 percent of their discretionary income for federally backed student loans and allow loans to be forgiven after two decades. It also includes special loan forgiveness provisions for such public servants as teachers and firefighters.

Rep. Virginia Foxx (R-N.C.) said lawmakers who supported the bill were "taking away personal responsibility from people and giving them out-and-out payments for loans that they take out."

"We should call this the new Democratic welfare bill," she said.

Miller said the changes were necessary to make college affordable to all Americans. "We have an obligation to make sure that students have the maximum opportunity to take advantage of a college education," he said.