This article has been modified from its original version. Correction appended.

Congress may slash $12.7 billion from student loan funding as part of a budget cut facing a final vote in the House on Feb. 1, sparking protests from advocacy groups who say that college students and their parents should not have to bear the brunt of budget reform.

For students at Harvard and elsewhere, the cuts will mean higher interest rates on loans, although the loan limit will be raised for freshmen and sophomores starting in 2007.

Officials at Harvard and several educational advocacy groups have criticized the proposed measures for diverting funds from programs that make college education more accessible to all students.

As part of the legislation, annual interest rates on federal loans would increase to a fixed rate of 6.8 percent for student loans and 8.5 percent for parent loans, according to Harvard’s director of federal relations, Suzanne Day.

Approximately 49 percent of Harvard students graduate with some debt from student loans—whether federal or otherwise—according to the Harvard College Financial Aid Office website. The median educational debt for the graduating class of 2005 was $6,400.

The proposed fixed interest rates, which would go into effect July 1, would be significantly higher than current interest rates, Day said.

“As more students take out larger loans to pay for college, Congress is looking to make those loans more expensive. That is an outrage,” said Luke Swarthout, a higher education associate with the State Public Interest Research Group, an advocacy organization.

This would mean that interest rates for both student and parent loans at Harvard would increase by more than two percent, according to statistics on current interest rates from the Financial Aid Office website.

As market interest rates vary, a fixed interest rate for loans might become more favorable for students than it is now, Day said. Still, she said, a variable interest rate might be best for students over the long term.

She added that Harvard students would be less affected by the changes than many of their peers, because Harvard’s financial aid plans generally require students to borrow less than they would at other schools. Harvard students graduate with significantly less debt than average, she added.

The loan cuts are also designed to close a legal loophole that benefitted the banks financing student loans, Day said. She added that she fears this lower profitability will impel banks to charge more for their student-loan services.

In total, the legislation would cut $21 billion from student-loan programs, but $8 billion of that would support the measures that benefit students—meaning that, altogether, student aid will lose nearly $13 billion of its present funding.

Benefits to students under the proposed legislation include an increase in the loan limit from $2,625 to $3,500 for college freshman and from $3,500 to $4,500 for sophomores. The limit for graduate students would also increase, Day said. Some of the $8 billion would also fund SMART grants, which would benefit students who study math, science, technology, engineering, or a foreign language believed to be critical to national security.

A TROUBLED HISTORY

The cuts to student-loan programs have stirred controversy largely because, according to some, they account for a too large a portion of the greater $40,000 budget cut, which would also affect Medicare, Medicaid, and other programs.

Student loan cuts make up almost a third of the total budget cuts.

“The single largest cut in the student budget bill is to students, well out of proportion to the size of the higher education programs and also totally inconsistent with the importance of affordable education,” Swarthout said.

Both Day and Association of American Universities (AAU) spokesman Barry Toiv ’77-’78, said that the $13 billion cut from loan programs should have been used to benefit students in some other way.

The AAU, of which Harvard is a member, has lobbied strongly against the proposal.

“Those dollars are better reinvested in higher education and making college more affordable and accessible for all students, rather than deficit reduction or potential deficit reductions,” Day said. “A lot of these dollars will be used to offset tax cuts and other spending.”

Regardless of criticism from the higher-education community, the proposal has proved problematic from a purely legislative point of view.

Both the House and the Senate passed the proposal in December by a narrow margin—Vice President Dick Cheney had to return from the Middle East to break a Senate tie—but the bill must now be reconsidered in the House because of last-minute changes that the Senate imposed.

If the House approves the measures again, President Bush has promised to sign them into law, Day said.

Some advocacy groups are taking advantage of the bill’s second appearance on the House docket to pressure moderate Republicans to switch their votes against the proposal, according to Swarthout.

—Staff writer Lois E. Beckett can be reached at lbeckett@fas.harvard.edu.

CORRECTION: In the original print and online versions of this article, an advocacy organization was incorrectly referred to as the State Progressive Interest Research Group. In fact, it is the Public Interest Research Group.

The Crimson regrets the error.