Morning Edition, June 26, 2007 · A bill before Congress would cut billions in federal subsidies for the student loan industry and increase the amount of money available for needy students – with funding coming from the pockets of lenders. The industry is under assault after reports of unethical financial relationships between universities and private lenders.

Loan industry defenders say the bill would favor lenders who don't have students' best interests in mind. Student advocates say money that now goes to lenders should be re-routed toward students.

"What Congress is talking about doing is taking these lenders subsidies and shifting it all to increase grants and cheaper loans so they'll be guaranteed to go to students," said Michael Dannenberg of the New America Foundation, a Washington think tank...

Lawmakers have voted in committee to cut billions in subsidies to lenders. Lenders would still get a guaranteed rate of return, and they'd still have a nearly complete government guarantee that protects them against default. But they would make a lot less on those loans...

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