Senate OKs Plan to Lower Student Loan Fees

WASHINGTON – Senators approved a plan to lower student loan processing fees and provide aid to students and schools in hurricane zones as the Senate began a hectic day of debate on a major budget bill.

The $2.7 billion plan, by Mike Enzi (search), R-Wyo., and Edward M. Kennedy, D-Mass., passed on a unanimous voice vote. Loan origination fees would drop from 3 percent to 2 percent, and $1.7 billion would flow to schools and students along the Gulf Coast. It passed after the Senate rejected, 31-68, a bid by conservatives to make much of the aid available through school vouchers.

The overall bill covers dozens of programs and makes modest cuts to the Medicare and Medicaid programs for the elderly and for the poor and disabled. It also contains a hotly contested provision to open an Alaskan wilderness area to oil drilling. Senate leaders hoped for a final vote Thursday.

A bid by Sen. Maria Cantwell (search), D-Wash., to strip the Arctic oil drilling plan from the bill was defeated, 51-48.

The Senate bill is estimated to trim $39 billion from budget deficits totaling $1.6 trillion over five years — just 2 percent. For the budget plan's first year, with deficits predicted to exceed $300 billion, the cuts total $6 billion.

Across the Capitol, the House Budget Committee approved a $54 billion deficit-reduction bill by a party-line vote. But so many GOP lawmakers are unhappy with the bill it seems clear it will have to be reworked before a final floor vote. Moderates are unhappy over the plan for oil drilling in the Arctic National Wildlife Refuge and cuts to a variety of social programs, especially food stamps, child support enforcement and Medicaid.

Republicans say the debate marks an important moment for their party, which gained control of Congress 11 years ago with promises to balance the budget. The return of intractable deficits and surging spending has caused many Republicans heartburn over their record on spending and budget deficits.

The long-planned budget measure would make the first cuts to so-called mandatory programs since 1997. These account for 55 percent of the budget and include Medicare, Medicaid, farm subsidies and student loan subsidies.

The White House strongly supports the overall effort, but has threatened to veto the bill over an obscure provision to kill subsidies for some health insurers offering Medicare prescription drug coverage. The White House stand threatens $5.4 billion in savings. The fund was designed two years ago to entice certain regional health care providers to offer prescription coverage under the landmark Medicare drug law taking effect Jan. 1.

Democrats are united in opposition to the bill because it both permits drilling in the Arctic National Wildlife Refuge and increases the deficit once coupled with a subsequent $70 billion tax cut bill.

"Their budget ... actually would make the deficit worse," said Minority Leader Harry Reid (search), D-Nev. "That's fiscally irresponsible at any time, but especially when we should be saving to prepare for the baby boomers' retirement."

Separately, Federal Reserve Chairman Alan Greenspan weighed in again to encourage Congress to curb the deficit.

"Unless the situation is reversed, at some point these budget trends will cause serious economic disruptions," Greenspan said.

The Senate bill reflects the influence of moderates providing swing votes in the chamber and on key committees such as the finance panel, which drafted provisions curbing the growth in Medicaid and Medicare.

As a result, the Senate's Medicare and Medicaid cuts largely won't touch beneficiaries of the programs, instead tapping drug companies, pharmacies and insurance subsidies for much of the savings. The Agriculture Committee dropped plans to cut food stamps.

There's plenty of sugar to go along with the fiscal medicine. The bill contains more than $30 billion in new spending to go along with the cuts.

The nation's doctors would get an $11 billion reprieve next year from a scheduled 4.3 percent cut in their Medicare payments. Dairy farmers won a $1 billion extension of milk income payments. College students would get more than $8 billion in new grants, and more disabled children would retain Medicaid health coverage.