EDUCATION LOAN RATES COULD DROP NEW COMMITTEE CHAIRMAN TO SUCCEED `BUCK' MCKEON.

Byline: ALEX DOBUZINSKIS Staff Writer

As the Democratic takeover of the House sidelines Santa Clarita's Republican Rep. Howard P. ``Buck'' McKeon, changes are expected in how the committee he chairs handles student loans.

Democrat Rep. George Miller, who's expected to replace McKeon as chairman of the House Committee on Education and the Workforce, wants to halve the interest rate charged on loans to needy students.

He also wants to increase the number of ``direct'' loans that the government makes to students. The president's budget office found those kinds of loans cost the government less than federally backed loans from private lenders.

``What (Miller) wants to do is to make sure that the high cost of college never stands between a qualified student and a college degree,'' said Tom Kiley, a spokesman for Miller, of Concord, Calif.

McKeon, who has been on the committee for 14 years and took over as chairman in February, will remain a member after he gives up the leadership role. While Miller's office faults the program that guarantees rates of return to ``middleman'' private lenders, McKeon says the government's direct loan program is wasteful.

``It seems to me that Democrats are always concerned about people making money,'' McKeon said. ``... If people don't make money, they don't stay in business. If they don't stay in business, they don't perform the service they render.''

Under McKeon's committee chairmanship, the interest rate charged on student loans increased 2.5 percent July 1. As a variable interest rate, it could have risen even more, but Democrats and Republicans agreed two years ago to increase it to 6.8 percent this year, McKeon said.

Private lenders pressure the government to guarantee a certain rate of return on their student loans, which were historically risky investments. But critics say the system puts lenders ahead of students.

``It drives me crazy how much taxpayer money has been wasted on excessive subsidies for student loan companies, instead of making college more affordable for families,'' said Michael Dannenberg, director of education policy for the New America Foundation.

This election cycle, McKeon received $11,000 in campaign money from student loan lender Sallie Mae Inc., and $10,000 from student loan company Nelnet Inc. While the education sector was the sixth-largest source of contributions for McKeon, Miller got more of his money from unions, according to opensecrets.org.

The federal government gives loans to 6.9 million students a year. About 25 percent of the loans are ``direct'' government loans through the Department of the Treasury. The rest are made by private lenders.

Students all pay the same interest rates, but there are two kinds of loans. Federally subsidized loans don't accrue interest while students are in school, but those are offered only to needier students.

Miller's plan to halve the interest rate on student loans would apply only to the subsidized loans, which last year accounted for 5.7 million of the program's loans. Officials estimate that a move to reduce the interest rate to 3.4 percent would cost $18 billion over five years.

In the last election, Democratic opponent Robert Rodriguez accused McKeon of being too cozy with student loan lenders. McKeon easily defeated Rodriguez, winning nearly 62 percent of the vote.

And McKeon stands by his decision to let interest rates go to 6.8 percent, saying that is a relatively low rate.

``They're saying that we did that, but that was a joint effort and (Democrats) pushed us to help do that,'' McKeon said. ``During the election, they beat up on us for doing it.''

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