Loans row hits poll

October 4, 1996

Already stumbling badly, Republican candidate Bob Dole's presidential campaign is now on the defensive over the United States' student loan programme.

Republican attacks on popular "direct" loans have helped Democrats to cast themselves as the protectors of higher education.

Direct loans, where the government lends money directly to students rather than working as a guarantor to private bank loans, have progressively expanded since they were introduced by the Clinton administration three years ago. It is lauded by colleges for dramatically simplifying the loan system and lowering interest rates for students in the process. But Republicans have denounced it as "big government" dabbling in education.

The Federal Direct Student Loan Program was passed by the then-Democrat Congress in 1993. Republicans have since sought to cap loans under the programme in favour of private lenders, in a move they say is intended to save taxpayers' cash.

But Democrats such as vice president Al Gore, and television advertisements aimed at Republican congressmen, have targeted Republicans for alleged student loan cuts.

President Clinton has already put the issue of access to higher education at the centre of his effort to woo middle-class voters, with pledges to make the first two years of college neary automatic for students with academic qualifications.

Mr Dole, in contrast, has primarily held out the promise of tax cuts for parents of students - a promise of which voters are widely sceptical, according to polls.

Orlo Austin, director of the University of Illinois' office of student financial aid, said Republicans have fallen on the wrong side of the issue. Direct loans replaced "multiple layers of bureaucracy and profit-making" in the old system.

"It is not the giant bureaucratic programme that Republicans would like to paint it," he said.

Previously the university dealt with some 30 different state guarantee agencies and several hundred banks, he said. It was frequently forced to act as intermediary in disputes between banks, students, and guarantee agencies.

Direct loans, however, have enabled the university to use automated processing, impossible before because competing lenders did not use common formats, he said. And their lower interest rates have forced private lenders to reduce their own rates to compete.

The University of Illinois was cited as a case in point when the Washington watchdog group, Citizen Action, released a report titled Big Money On Campus.

The report claimed that it is political money that is driving Republican opposition to direct loans, charges dismissed as "ludicrous" by the party. It noted that 100 banks involved in providing government-guaranteed student loans - a business worth an estimated $800 million a year - have made more than $2 million in political contributions since January 1995.

Nearly three-quarters of that money has gone to Republicans, it said.

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