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Kennedy bill cuts out college loan `middleman'; More schools would let students get funds straight from government.

Byline: Danny Lauridsen

WASHINGTON - U.S. Sen. Edward M. Kennedy, D-Mass., has introduced legislation aimed at boosting college scholarships and student loans without requesting additional funds from taxpayers.

Mr. Kennedy, whose Senate Health, Education, Labor and Pensions Committee will hold a hearing tomorrow on college affordability, has made several proposals recently to improve aid for college students and overhaul the student loan industry.

"Higher college prices are shutting more students than ever out of a college education, yet billions of dollars are wasted every year in taxpayer subsidies that line the pockets of the student lending world," Mr. Kennedy said at a press conference Tuesday, flanked by college students.

Sen. Gordon H. Smith, R-Ore., who joined Mr. Kennedy as a sponsor of the bill, added: "Higher education is essential to success in a competitive global economy. Those across the country deserve as affordable an education as possible."

Mr. Kennedy argued that by encouraging more schools to participate in programs in which students receive money directly from the federal government, his bill would cut out the "middleman" of banks that profit from student loans.

"It's time to inject some real competition into the loan programs, so that they help students, not banks," he said, adding that student loans are currently the second most profitable business for banks, behind credit cards.

Currently, there are two federal student loan programs: the Direct Loan Program and the Federal Family Education Loan Program. Mr. Kennedy's bill endorses the Direct Loan Program, which he said cuts out the middleman banks.

In the Federal Family Education Loan Program, private and nonprofit lenders compete to provide these funds. Program supporters argue that the direct lending program has cost taxpayers $16 billion since 1997 and continues to add to the national debt.

Mr. Kennedy, however, argued that if all loans had been made through the direct lending program, the federal government would have saved $30 billion since its inception in 1994.

"Clearly, the direct loan program is the better program," he said.

Furthermore, Mr. Kennedy said, the Congressional Budget Office has estimated that his bill, which encourages the use of the direct loan program, would save $13 billion, of which $10 billion could be invested into additional Pell grant scholarships and graduate fellowships.

Mr. Kennedy said that in November President Bush stated he would give $51 billion to the Pell grant program. "We're going to give him the opportunity to sign off on it," he said.

Kennedy's bill has drawn some bipartisan support, including that of Mr. Smith and Rep. Thomas E. Petri of Wisconsin, a senior Republican on the House Education and Labor Committee.

Students from the Student Public Interest Research Groups, independent state-based student organizations that work to solve public interest problems, spoke after Mr. Kennedy gave his initial address. A group of about 200 students nationwide came to Washington Feb. 9 to lend their support on a variety of legislation ranging from global warming to ethics reform.

"It's a great opportunity," Michelina Ciruolo, a Salem State College student, said after the press conference. "It's a really good cause."

Students from the University of Oregon, the University of California at Berkeley and the University of Wisconsin at Stevens Point also spoke.

"We like to believe we're a competitive society, but we don't in regards to student loans, and the ones who are paying the piper on the student loans are the students, and that is wrong," Mr. Kennedy said.

"It's outrageous in this day and age that 400,000 qualified students each year don't attend college because they can't afford it."

He added that the cost of college has tripled in the last 20 years.

The legislation: Increases college scholarships and student loans

The quote: `Billions of dollars are wasted every year in taxpayer subsidies that line the pockets of the student lending world.' - Sen Edward M. Kennedy

The response: `It's a great opportunity. It's a really good cause.' - Salem State College student Michelina Ciruolo

ART: PHOTOS

CUTLINE: (1) Sen. Edward M. Kennedy, D-Mass., takes part in a news conference yesterday on Capitol Hill. (2) Smith

PHOTOG: THE ASSOCIATED PRESS
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Title Annotation:NEW ENGLAND
Publication:Telegram & Gazette (Worcester, MA)
Date:Feb 15, 2007
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