By David R. Kazak

The Direct Student Loan Program, created by Sen. Paul Simon, D-Ill., and touted by President Bill Clinton as essential to education’s future, escaped the GOP budget-cutting axe Friday when a Senate committee voted to retain the program.

However, Simon said the program still faces a participation cap which could affect SIUC students who receive direct student loans.

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The Senate Labor and Human Resources Committee voted 9-7 against a proposal to eliminate the program from the federal budget, which is facing a $10 billion cut in educational loan programs.

Two Republican senators, including the Senate Education Subcommittee Chair Sen. James Jeffords, R-Vt., voted with Democrats against the proposal.

Eric Smulson, a spokesman for Jeffords, said the senator voted with the Democrats because although he is cautious about the program, he does think it is a good idea.

In theory, the senator thinks it is a good program, he said. He wants to give it time to play out. So far, we’ve done the easy part of giving out the money, and that has gone well. Now we need to see what happens when we try and collect it.

Jeffords’ motivation for his vote was the fact that he is the chair of the Education Subcommittee, Smulson said.

Obviously he will do all he can do to save education. Smulson said.

But Simon said along with the survival of the program comes the possibility of a cap on the program which would limit the number of schools that will be allowed to take part in the program.

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Simon, who is a member of the Labor and Human Rescources Committee, said the proposed 20-percent participation cap could mean SIUC may have to drop out of the program because the cap is lower than the current level of university participation in the program. The proposal will be voted on Tuesday.

It looks like they have the votes for that, Simon said after Friday’s vote. It is not fair because colleges should have a choice whether they want to participate in the program.

Simon spokesman David Carle said if the 20-percent cap gets added to the budget proposals, at least one out of every three schools which now participate in the program would be forced out.

Simon said banks and guarantee agencies have made a lot of money off the Guaranteed Student Loan Program in the past, and said the Republican-backed cap will only be good for those agencies.

Even with (Friday’s) vote, the cap would be nothing but a lift for the banks, Simon said. He also said he is working on a way to try and sway the vote against the cap proposal, but did not have specific details to offer.

Many other proposals will be voted on Tuesday including a student loan charge which Democrats are calling a tax. The charge could be as much as two percent, but Smulson said other proposals on the table call for charges a little as .8 percent.

The charge would be applied to the overall amount of student loans universities give to students. With a two percent charge, a school that distributes $100 million in student loans would have to pay $2 million back to the government.

An SIUC financial aid study which examined student loan figures for fiscal year 1994 shows the University distributed more than $40 million in federally subsidized and unsubsidized loans to 11,250 students.

Also on the table are proposals to scale back the interest-free grace period on student loans from six months after a student leaves school to four, an increase in the interest rate on loans taken by parents for student purposes from the current 3.1 percent to 4 percent, an $800 million cut in guaranty agency entitlements and another $1.5 billion entitlement cut for banks.