Bush Proposal Stokes Student-Aid Spat With Democrats

By Sean Cavanagh

Washington

The debate among federal lawmakers over how students should pay for college—and how much the government is obligated to help them—boiled over last week. And some observers expect the intensity of the dispute to continue as tuition costs rise across the country and Congress inches toward next year's sweeping review of postsecondary financial aid.

In a wave of public statements, including a press conference with students and teachers on May 2, Democrats attacked a proposal from White House budget negotiators to force students to consolidate college loans under a federally subsidized variable-interest rate, rather than a fixed rate. That suggestion, which the Bush administration appears to have backed away from, would have cost students thousands of dollars, higher education advocates argued.

But it might have saved the government up to $1.3 billion, according to some estimates—enough to cover a shortfall in the fiscal 2002 budget for the Pell Grant program, which helps low-income students pay for college. Some Republicans and student-loan lenders argue the current loan-consolidation structure favors wealthier borrowers rather than...