By David R. Kazak

In a move which Democrats are calling a complete surprise and Republicans are calling a trade-off, a U.S. House committee passed a proposal Thursday which, if it becomes law, will eliminate the direct student loan program.

The move by the House Committee on Economic and Educational Opportunities comes two days after a similar Senate committee voted to retain the program but cap its participation level at 20 percent of the total federal student loan volume.

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The Senate vote caused concern Tuesday among SIUC administrators. Both SIUC Financial Aid Director Pam Britton and SIU Chancellor Ted Sanders said the Senate cap could force SIUC out of the program because current direct student loan participation nationwide is sitting at more than 30 percent.

But the House proposal calls for the elimination of the program. Britton said this new vote is disappointing because she said there was no debate allowed. A committee spokesperson said there was a motion to delay the vote and hold hearings, but that motion was defeated.

All we can do is hope for a presidential veto, she said.

Brian Lott, a spokesman for Rep. Jerry Costello, D-Ill., said the House committee’s vote to eliminate the direct loan program was a surprise. He said House Democrats, including Costello, were expecting a proposal similar to the Senate proposal, not not the loan program’s eradication.

This comes as a total and complete surprise, Lott said. All of a sudden, they just decided to eliminate it.

Cheri Jacobus, a spokesperson for the Republican majority in the House Education and Economic Opportunities Committee said the reason for the elimination of the direct loan program is to save in-school interest subsidies.

She said there was no way to keep the loan program because the committee was directed to find $10.1 billion in savings. The direct loan program, she said, costs too much money.

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The program costs the taxpayers $1.5 billion, she said. That’s $1.5 billion out of the $10.1 billion we needed to find in savings.

But the $1.5 billion figure has been the subject of much controversy. Republicans use the figure because it comes from a Congressioal Budget Office report which states the direct loan program is costing money rather than saving it, despite the fact that banks and guarantee agencies have been eliminated from the process of students receiving loans.

Democrats say the figures are wrong and that the budget office used incorrect procedures to determine the cost of the direct loan program.

Costello called the Republican trade-off a smoke screen.

(The trade-off) is simply not true, he said. They can keep both programs, if only they would get rid of the $275 billion tax-cut they are going to pass. It will only benefit the rich and, as in this instance, take from the poor.

Costello also said, (The direct loan program) is less bureaucratic and more fair. Eliminating this program takes money away from students and puts it into the coffers of the banking industry.

Responding to that charge, Rep. Howard McKeon, R-CA., said, Nothing could be further from the truth. Over half our savings are being obtained from the lender and banker communities.

I guarantee you they are not happy with the hits they are taking, McKeon said.

Thursday’s proposal does call for $4.9 billion in program changes affecting lenders, guaranty agencies, secondary markets and states. But Jacobus would not offer any details about what those changes were.

All I can say is that the cost to the lending industry should not be passed on to the students, she said.

Because Costello does not sit on the committee which voted to eliminate the program, he will not have the opportunity to fight the proposal until it reaches the House floor sometime in late October.

If it passes the entire House, it will move into a reconciliation committee where it will be melded with Senate proposals.

It then must pass both houses of Congress, and if it does, it will go to President Clinton, where he can either sign it into law or veto it and send it back to Congress.

It would take a two-thirds majority to override a presidential veto. If Congress cannot accomplish that, then they must amend the bill so the president will sign it.

The House committee also passed the elimination of the interest subsidy which students receive on their loans during the six-month after-graduation grace period and an increase in interest rates on loans parents take out for students. Similar proposals were passed by the Senate committee Tuesday.