By David R. Kazak

A U.S. Senate committee will vote on a GOP-sponsored $10 billion cut in government spending on student loans which, if passed, could cut many student loan benefits SIUC students currently enjoy.

If the proposal survives as a whole, it could eliminate the federally-subsidized six-month interest-free grace period, raise interest rates on loans parents take out for students, cap direct student loan participation at 20 percent and force SIUC to pay the government nearly one percent of its student loan volume.

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The cut will be debated by the Labor and Human Relations Committee, which is reconciling the student loan budget proposals from the House and the Senate. Sen. Paul Simon, D-Ill., a committee member, said he believes the Republicans on the committee have the votes to pass the proposals.

Simon said the 20-percent cap on the Direct Student Loan Program he developed is nothing but a Republican maneuver to protect banks and guarantee agencies. They lose money, he said, because of the DSLP.

This is a classic confrontation between the interests of the students and the public on the one hand, and a well-funded special interest group on the other, Simon said. The lenders in the Guaranteed Student Loan Program are fighting hard to protect their lucrative federal subsidies and to get as much of a monopoly as this Congress is willing to give them, he said.

Simon spokesperson David Carle said despite cuts in entitlements which go to banks and guarantee agencies, the cuts to the students’ part of the loan program is unnecessary.

It’s a matter of priorities, Carle said. Education should be one of our highest priorities. If (Republicans) would just take away $10 billion from their proposed $240 billion tax cut, we would not have to take anything away from the students.

Other student benefits which could be eliminated are the government subsidized six-month interest-free grace period student have after they graduate or leave school.

Sen. Nancy Kassebaum, R-Kan., who is the Labor and Human Relations Committee chair, said student will still have six months before they have to start paying the loan back, but the interest would no longer be paid by the government.

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Even so, SIUC Financial Aid Director Pam Britton said she does not feel the elimination of the interest subsidy is in the best interest of the students or the future of America.

Increasing student debt, as this proposal would do, will keep people from becoming active consumers, Britton said. This is not good for the economic health of the nation.

Britton said she did not want to come out against any one aspect of the proposed spending cuts, because they all are a matter of priority to her. This includes, she said, the .85 percent charge on student loan volume universities would have to pay.

Britton said this charge is not fair because it would require SIUC to pay a charge which is based on how needy its students are.

That would be a serious problem for the University, she said. It would be a fee that would encourage a low volume of financial aid. This is contradictory to our purpose of serving students regardless of their financial need.

Britton said if this fee goes through, SIUC would have to pay more than $350,000 to the government because of its loan volume, which according to a study done in May of this year, is $42 million.

Britton also said she was concerned that the debate about whether the DSLP was better or worse than the Guaranteed Student Loan Program has gotten lost.

The direct loan program is going to be capped and that will hinder its evaluation in the long run, she said. The debate on which loan program saves money is yet to be resolved. Capping the program will not give the time need to make a fair evaluation of its performance.