Congress Seeks to End Student Loan Clause

WASHINGTON – Congress is trying to end a practice that unintentionally has allowed banks to take in billions of dollars meant to help students pay for college.

Lenders are profiting from a promise the government made in 1980 to encourage college loans: a guaranteed return of 9.5 percent on those loans financed by tax-exempt bonds.

The government must pay lenders the interest that is not covered by students. With interest rates now below 3.4 percent, making up the difference has become a budget nightmare.

Republicans and Democrats have different ideas about how to end the big payments to lenders. Lawmakers on both sides hope to pass at least a temporary fix before Congress is done for the year.

On Thursday, the Republican chairmen of the House and Senate education committees offered legislation to erase the 9.5 percent guarantee and shift the savings to teachers.

Teachers who spend five years in poor schools and in the fields of math, science and special education would get as much as $17,500 in loan forgiveness, more than triple the current aid.

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