She said others also objected that "anything we do to subsidize education will just encourage institutions to raise the price tag."

Originally, the program was to offer an additional deduction on state income tax to make up for the interest that was not deductible from federal income taxes.

However, recent changes in federal policy on student loan interest more than halved the Massachusetts program's cost and made a change in state policy easier to sell.

By 2001 the federal government will have more than doubled the maximum deduction for student loan interest.

Through 1998, only $1,000 was deductible from federal income tax. This year, the maximum deduction is $1,500 and by 2001 it will be $2,500, about the amount of interest on a $30,000 loan that charges 8 percent interest. The deductions only apply during the first five years of repaying the loan.

The measure started in the Senate, where it was passed as part of the budget package.

When House and Senate leaders met to reconcile their separate budgets, the interest deduction plan was worked into the final legislative budget without any changes.

The state estimates that the tax deduction will cost the Massachusetts government about $6 million per year.