July 13, 2007

Congress May Radically Change How Student-Loan Subsidies Are Set

By KELLY FIELD

Lender scandal gives new life to auction proposal

Congress is considering a plan that would require banks and other lenders to compete for the right to make federally guaranteed student loans.

The proposal, which has bipartisan support, would set up government-run "auctions" in which lenders would bid on loans based on the size of the government subsidy they would be willing to accept. Those lenders that agreed to the lowest subsidy rate would "win," earning the right to lend to

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