THE CONGRESSIONAL budget process has now run into trouble on, of all things, the federally guaranteed loans to college students. It's a marvelously clear example of the difficulty in holding down spending -- and also a clear test of congressional determination to keep trying.
The student loans constitute an unusually interesting case because, unlike most kinds of federal aid, there is no attempt here to funnel help only to people who are poor. These loans, with their heavily subsidized interest rates, go to any student -- literally -- for the asking. It is, deliberately, aid for the middle class. It is supported by aggressive and sophisticated lobbying by the colleges and universities, which, confronted with rising costs and declining numbers of 18-year-olds, are pressing Congress increasingly hard.
The guaranteed student loans are expanding with great speed, both in number and in cost to the government. Current law sets that interest rate at 7 percent. That's less than half the commercial rate -- and, incidentally, it offers a nice profit to a family with cash on hand to invest while the government carries the tuition bills.
The House Education and Labor Committee has been through a long, careful review of the legislation, weighing its obvious anomalies against its social benefits -- which after all are not trivial. To be a resident student costa around $4,500 a year at public colleges and twice as much at some of the private ones. That's a severe burden for even a prosperous family.
A revision of the Higher Education Act is now in the final stage of passage, and the Senate Budget Committee is vigorously fighting it on grounds that it would bust the budget limits that the Senate itself has adopted. Last week the Senate, by a narrow margin, followed its Budget Committee and rejected a conference report that generally followed the House bill. This week, the bill's backers will probably try once again to get it through to the Senate.
But the Senate Budget Committee is essentially right. At a time of tight budgets it is not right to run these loans as an open-ended entitlement program, limited neither in total cost to the government nor in eligibility according to need. The conference bill would raise the interest rate to 8 percent, but setting a statutory rate is wrong in principle. Congress ought, instead, to set the size of the subsidy. If the Senate passes the higher education bill in anything like its present form, it will have signaled an important retreat in its struggle to hold down next year's budget deficit.