Education A Washington Roundup

Loan Subsidies

By Sean Cavanagh — October 19, 2004 1 min read

A bill that would temporarily close a loophole that has allowed lenders to receive hundreds of millions of dollars in federal student-loan subsidies was approved unanimously by the Senate on Oct. 9. It now goes to President Bush, who has indicated his support. Democrats said they agreed to back the bill despite their objections that it will still allow lenders to collect some of the subsidies and will close other portions of the subsidies for only one year. The loophole allows lenders to collect a 9.5 percent yield, rather than the lower market rate, on certain federal student loans issued through tax-exempt bonds.