Legislation Introduced by Congresswoman DeLauro

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Summary

College Loan Assistance Act of 2005

The College Loan Assistance Act of 2005 would provide relief to millions of college students from high interest payments on their student loans. It is critical that Congress takes a comprehensive approach in addressing the many challenges students and their families face in financing a college education.

The cost of higher education has increased dramatically over the past few years making college less affordable for many families. As college tuition has climbed, so has the number of students who borrow to help pay for it. Ten years ago, about 46 percent of graduating seniors had taken out educational loans in their undergraduate careers. By 2000, roughly 70 percent of them did. According to survey by the student loan company Nellie Mae, student borrowers now amass an average of $27,600 in educational debt.

A student consolidation loan is an important tool to students and their families to help make the cost of college more affordable. When students graduate and leave college campuses across the country this year, they are able to lock in at a low-fixed interest rate, which has dropped to a historic low, from 3.42 percent to 3.37 percent through June 30, 2005.

Sadly though, many students are not able to consolidate at this lower rate because they have refinanced once before. Current law states that student borrowers are only allowed to consolidate or refinance their loans once. The College Loan Assistance Act would change that by allowing students that have already locked in at a much higher interest rate to take advantage of these historic lows and consolidate their debt.

In addition, the College Loan Assistance Act would eliminate loan and origination fees charged to student borrowers. Currently, the government charges student borrowers a fee of up to four percent on the loan principal adding to the burden of a student’s debt. While many student borrowers never see these fees, they accrue interest and add to the overall debt they have to pay back.

While we need to find solutions to make student loan debt more manageable, we also need to make college education more affordable. As the cost burden of higher education has increased dramatically--disproportionately on the shoulders of lower-income families--the strength of the Pell Grant has decreased. The purchasing power of the Pell Grant has declined from covering 84 percent of the tuition at a four-year public institution in 1975-76 to 39 percent today. The College Loan Assistance Act restores the original purchasing power of the program by providing much needed increases to the maximum Pell Grant by increasing the authorized level of the maximum Pell Grant to $7,000.

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