Some Help for Gulf Colleges

Emergency spending bill would create $50 million grant fund, but not proposed $200 million loan fund, for Katrina-damaged institutions.
June 8, 2006

Colleges in New Orleans would receive some federal help, but not as much as they'd hoped, under a compromise version of an emergency spending bill that Congressional negotiators were near agreement on Wednesday.

The $94.7 billion "emergency supplemental" appropriations bill, which will direct most of its funds to the war effort in Iraq and to help rebuild the Gulf Coast, would provide $50 million in grants, awarded through the Fund for the Improvement of Postsecondary  Education, to 12 colleges and universities in Louisiana. A proposal by Sen. Mary Landrieu (D-La.) to double the size of the grant program was scuttled in deliberations of the "conference" committee made up of members of the Senate and the House of Representatives.

And to the dismay of lobbyists for the colleges, the legislation, the fourth such measure Congress would pass this year to supplement 2006 federal spending, does not call for creating a fund for "bridge" loans for Gulf colleges that a Senate version of the legislation would have established. The Senate bill called for a $200 million fund that could have grown up to three times that size, and the officials in the federal Office of Management and Budget apparently grew concerned about the possibility that institutions would be unable to repay the funds.

Spending bills like this one also can become mere vehicles for other legislative endeavors that certain lawmakers are trying to push through Congress in a hurry, and several provisions related to higher education were added to the measure or fought off.

Members of the conference committee decided not to include in the legislation a measure favored by lenders that would set the interest rates for loans for parents in both federal student loan programs at 8.3 percent. A budget cutting law that was enacted in February set the rates for the so-called PLUS Loans at 8.5 percent in the guaranteed loan program but at 7.9 percent in the direct loan program, and banks and guarantee agencies have argued that the rates should be equalized. But that argument apparently failed to sway the conferees.

The conference committee members reportedly did agree to include a provision in the supplemental bill that would repeal the "single holder" rule, which has mandated that a borrower who has all of his or her guaranteed loans with one lender can consolidate those loans only with that lender, rather than shopping around for the best rate. The rule was supposed to have been eliminated last spring, but an Education Department policy change kept it in place.


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