Federal Subsidies to Student Lenders Come Under Fire

The House of Representatives last week approved a proposal to tighten a loophole that has allowed lenders participating in a federal student-loan program to reap hundreds of millions of dollars in revenues in recent years—and fueled acrimonious debate over why the payments weren’t halted sooner.

The Republican-sponsored proposal would close off a portion of the subsidies and redirect that funding to teachers who agree to work in high-poverty K-12 schools that receive Title I money. The measure appears to be making quick progress: After passing the House 414-0, the Senate was expected to take it up late last week and then send it to the White House, which supports the legislation.

But that plan fails to satisfy critics who say it has loopholes of its own that would allow lenders to continue to rake in excessive profits...