The Bush administration unofficially withdrew a proposal to change the system of student debt consolidation Wednesday in the midst of heavy criticism from some members of Congress.
Under the proposal, university students would no longer have been able to consolidate numerous loans at a fixed, federally subsidized interest rate. Instead, the interest rate would have been variable. According to the proposal's author, the White House Budget Director Mitchell Daniels Jr., the plan would have saved the federal government approximately $1.3 billion.
Although the Bush administration has made no formal written indication to acknowledge the dropping of the proposal, White House Press Secretary Ari Fleischer said in a press conference Wednesday that due to the lack of congressional support, it would be unlikely that the proposal would pass in Congress.
\We're just going to continue to work with the Congress to find a solution,"" he said. ""That idea was always a voluntary one, never a mandatory one. But clearly, if there is no congressional support for something, it won't move anywhere.""
Daniels originally proposed the change to reallocate funds to another federal financial aid program, the Pell Grant. Critics of the current debt consolidation program say it allows for exploitation at the government's expense by highly paid professionals.
David Sirota, the minority press secretary for the House Appropriations Committee, also pointed to the lack of support by Congress, although he said it is difficult to know the end result until anyone reads the final language of the bill.
""What happened was they ran into such a groundswell of opposition ... they realized that they had been exposed for what would have amounted to a tax increase on the middle class,"" he said.
UW-Madison junior Julie Mosakal said she pays part of her tuition on student loans and said she feels more comfortable knowing exactly how much money she will have to pay after she graduates, as opposed to being uncertain of the interest rates if her loans were variable.
""By the time I get out, my loan will be about $17,000, which is a lot of money for me,"" she said, adding that she has not really considered her future or how she will pay it back.
Although students in debt will not have to worry about the interest rates after they graduate as of now, according to Sirota, a report released Thursday by Rep. David Obey, D-Wausau, points to other financial concerns for students, such as a tuition increase of up to 11 percent at public universities this fall, mostly because of the Bush administration's policies and tax cut.
