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Providers of college loans form own PACs

Providers of student loans, seeking to block efforts to cut their interest rates, are trying to make their voices louder through their own political action committees.

Sallie Mae - the nation's largest buyer of government-guaranteed student loans - recently began its own PAC, and its competitors started a fund-raising drive for their own."Forming a PAC is part of an overall persuasion strategy," said Larry Makinson, deputy director of the Center for Responsive Politics, a group that studies the relationship between money and campaigns.

"If you have 5 million members" - a major religious group, for example - "that will certainly capture the attention of a member of Congress," Makinson said. "If you have a compelling issue that has attracted the public's attention, that will certainly capture the attention of a member of Congress. Lacking that, the fastest way to manufacture people caring about your side of the story is to create a conduit to deliver money to them. Bang, you've got their attention."

Sallie Mae officials said their new political tool has more to do with its transition last August from a government-chartered corporation to a private company than with influencing the higher education bill.

"We felt . . . (the PAC) was a natural progression as we make the transition to a private company," said Scott Miller, director of government relations.

Members of the Education Finance Council - the Washington-based trade association of non-profits that compete with Sallie Mae to buy student loans from banks - have created their own PAC, Friends of Higher Education.

"It's part of our political system, for better or for worse," said Harrison Wadsworth, deputy executive director of the council and treasurer of the PAC. "The feeling is we should participate in the political system in all aspects. This is part of the process."

In a solicitation letter, the PAC told potential donors that making contributions to lawmakers "will enable us to participate in high-level forums where we can express our views to those who can make a difference for student lending."

At issue is a July 1 date for changing the way interest rates are calculated on student loans, pegging the rate to longer-term treasury securities. Supporters of the change say it will save students millions of dollars in interest costs.

The change was enacted in 1993, when the education department expected its new, direct loans would largely replace the guaranteed loans. That hasn't happened because of resistance by Congress to having the government become a direct lender.

"It's potentially the biggest money issue for students," said Ivan Frishberg, director of the higher education project at the U.S. Public Interest Research Group. "This will have the biggest impact for students in terms of making student loans cheaper."

Others argue that banks may decide to stop making student loans because the lower interest rates won't attract investors.

"It's really a terrible problem that threatens the viability of the student loan program," Wadsworth said.

Student loans are expected to be part of the debate when the House Education and the Workforce Committee takes up a bill, perhaps this month, renewing major higher education programs.

"It's one of those issues that has been lying under the surface and has started to become more widely known and talked about," said Vic Klatt, education policy coordinator for the committee.

In the meantime, Sallie Mae and the other lenders have stepped up their contacts with key officials.

In addition to its in-house lobbyists, Sallie Mae has hired former Rep. Pat Williams, D-Mont., a former House Education subcommittee chairman. Williams, who is teaching at the University of Montana, said he was advising Sallie Mae on political strategy, sharing his observations and knowledge about the Education Committee members, their constituents and the arguments to which they might be receptive.

He also said he would be contacting lawmakers on behalf of Sallie Mae.

"My colleagues on both sides fully recognize that for 18 years I was on the side of the students," Williams said. "I'm still on that side. I hope my colleagues have trust in my judgment and opinion."