ST. CHARLES, Mo. – Democratic vice presidential candidate John Edwards (search) on Friday promoted John Kerry's (search) initiative to help students afford to go to college and criticized a government-set guarantee that banks earn a 9.5 percent return on some college loans.
"If we had real leadership in the White House," Edwards said, "we could take that money and give it to students who desperately need help."
Banks that provide college loans are guaranteed a risk-free return on their investment, set by Congress, because some students inevitably default on their loans.
Kerry's campaign contends that banks make almost $1 billion a year from the 9.5 percent guarantee on loans that are financed by tax-exempt bonds issued before 1993, all because of a loophole in a 1993 law that had been meant to rein in such high rates.
The campaign says President Bush (search) and the Education Department could close the loophole at anytime but have not acted, and it issued a memo accusing Bush of using "federal college aid to pad corporate profits and block access to college."
However, Dave Schnittger, a spokesman for the House Committee on Education and the Workforce, said that Bush's budget called for the elimination of the 9.5 percent rate but that the change failed in Congress.
"Congressional Democrats, including Kerry, blocked it," Schnittger said. "The president was the first one out of the gate on this issue. It's the Republicans who have led the charge."
Kerry's proposal calls for eliminating the 9.5 percent rate in favor of lower rates set by auction, not by Congress, which can be influenced by the banking industry lobbyists.
Noting that he was the first in his family to go to college, Edwards told a town hall meeting that hundreds of thousands of young people who want to do the same can't because tuition costs are going up and they can't obtain the loans they need because of cuts to those programs.
"How many people in this room get 9.5 percent guaranteed from the government?" Edwards asked. "That's your money, I believe. So why in the world is your money being used to guarantee that the banks, the big banks, make at least 9.5 percent of the money they're loaning to college kids?"
Edwards said the Kerry-Edwards plan would use that money to pay for a program in which the government would give a person four years' worth of college tuition in exchange for two years of public service. And, he said, the plan would give a tax credit of up to $4,000 for college students.
Bush campaign spokesman Brian Jones called the criticism "another in a series of disingenuous and flailing attacks" by the Democratic ticket. Bush has increased Pell grant funding by 47 percent since taking office, Jones said, and the current Bush budget proposal increases college student financial aid by 55 percent compared with 2001.