Bush to sign student loan bill

By Kevin Drawbaugh

WASHINGTON (Reuters) - President George W. Bush will sign a bill to slash federal subsidies to student loan firms and boost student grant funding, a spokeswoman for Rep. George Miller said on Thursday.

Miller, a California Democrat, was told of the president's intention in a phone call from U.S. Education Secretary Margaret Spellings, Miller's spokeswoman Rachel Racusen said.

"Secretary Spellings informed him that the president is going to sign the bill," Racusen told Reuters.

Miller chairs the House education committee and spoke at a Democratic rally on Thursday supporting the legislation that would raise college student aid funding by $20 billion, while making changes expected by Wall Street analysts to pare back the profits of lending firms.

"Our legislation ... takes the fat from the banks and lenders and gives it back to students," Massachusetts Democratic Sen. Edward Kennedy told the rally.

A congressional conference on Wednesday released final legislation that calls for a 0.55 percentage point cut in the government's "special allowance payment" subsidy to for-profit companies that make federally guaranteed student loans, such as Sallie Mae, Citigroup and many others.

The subsidy reduction is deeper than a 0.50 percentage point cut backed earlier by Bush.

Senate Majority Leader Harry Reid, a Nevada Democrat, at a press conference on Thursday listed student loan legislation as a high priority for passage in the next few weeks.

In another step, the legislation -- still subject to House and Senate floor votes -- calls for cutting interest rates on need-based loans in half to 3.4 percent over four years.

(Additional reporting by Richard Cowan)