A group of small and medium-size student-loan companies is teaming up to help fight proposals in Congress that could force them to pay more of the cost of the federally guaranteed loan program.

Both President Bush and the Democrats who control Congress have proposed cutting the subsidy rate on federally guaranteed student loans by at least 50 basis points, or five-tenths of a percentage point. Congress also is considering plans that would set the subsidy rate through an auction process in which banks would bid against each other.

America’s Student Loan Providers, a coalition of lenders and guarantee agencies, summoned their members and supporters today for a forum in Washington at which they repeated their warnings that such subsidy cuts would mean fewer lenders in the marketplace, and higher costs and worse service for borrowers.

A spokeswoman for Sen. Edward M. Kennedy of Massachusetts, chairman of the Senate’s education committee, rejected the criticisms.

Senator Kennedy, who backs both the subsidy cuts and the auction concept, issued a report this month saying that students already were being poorly served by a lending system that caters more to the lenders than to the students. And an auction system “is not likely to lead to more market consolidation because the student-loan market is already highly consolidated,” with most loans already serviced by only about five or six lenders nationwide, said the spokeswoman, Melissa Wagoner. —Paul Basken