The secretary of education sent a letter to Congress on Friday reiterating President Bush’s threat to veto a bill that would slash lender subsidies and use the savings to drastically increase student aid. Competing versions of the legislation, known as a budget-reconciliation bill, are being put together by a conference committee of the U.S. Senate and House of Representatives.

In the letter, the education secretary, Margaret Spellings, criticizes lawmakers for using budget reconciliation — intended as a deficit-reduction tool — to “create a host of expensive new federal programs rather than restrain federal entitlement spending.” She argues that money that lawmakers would spend on several new mandatory programs would be better spent increasing the maximum Pell Grant.

Ms. Spellings also criticizes the House’s plan to halve the interest rate on student loans, pointing out that it would help graduates, not current or prospective students.

And she takes aim at the Senate’s plan to create a two-tier subsidy structure that would differentiate between nonprofit and for-profit lenders, arguing that it would give the latter “a powerful financial incentive to find legal loopholes to receive the higher subsidy.”

The Senate’s version of the bill would reduce the subsidy rate for nonprofit lenders by 0.15 of a percentage point less than the subsidy for for-profit lenders. —Kelly Field