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Bill Would Boost Scholarships and Reduce Loan Costs at No New Taxpayer Expense
WASHINGTON, D.C. – Tenth District Representative Donald M. Payne, a senior member of the House Education and Labor Committee, voted in the committee today to approve legislation that would make the single largest investment in college financial aid since the 1944 GI Bill, helping millions of students and families pay for college – and doing so at no new cost to U.S. taxpayers.
The committee approved the legislation by a bipartisan vote of 30-16. Subsequently, the full House will vote on the legislation.
House Resolution 2669, the College Cost Reduction Act of 2007, would boost college financial aid by approximately $18.25 billion over the next five years. The legislation pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry by $19 billion. It also includes $750 million in federal budget deficit reductions.
“As a former high school teacher, I place high value on not only receiving a good education but also making sure that every student who wants to go on to college will have the means to do so, ” said Payne. “Every year, roughly 200,000 students either defer entering college or decide not to attend at all because they cannot afford it. One’s ability to attend college should not be based on cost. The College Cost Reduction Act of 2007 is another measure, provided by the Democratic-controlled Congress, to make a college education affordable and accessible to everyone.”
Under the legislation, the maximum value of the Pell Grant scholarship would increase by $500 over the next five years. When combined with other Pell scholarship increases passed or proposed by Congress this year, the maximum Pell Grant would reach $4,900 in 2008 and $5,200 in 2011, up from $4,050 in 2006, thus restoring the Pell’s purchasing power. Over 6 million low- and moderate-income students would benefit from this increase. With these changes, over 113,000 students in New Jersey would receive Pell Grant scholarships which include an additional 11,345 newly eligible students.
The legislation would cut interest rates in half on need-based student loans thereby reducing the cost of those loans for millions of student borrowers. Similar to legislation passed by the House earlier this year, the College Cost Reduction Act would cut interest rates from 6.8 percent to 3.4 percent in equal steps over the next five years. Once fully phased-in, the typical student borrower would save – with $13,800 in need-based student loan debt – $4,400 over the life of the loan. For New Jersey students, interest rate savings would total $4,600. At present, approximately 6.8 million students nationwide take out need-based loans each year, including over 61,000 New Jerseyans.
The legislation would also prevent student borrowers from facing unmanageable levels of federal student debt by guaranteeing that borrowers will never have to spend more than 15 percent of their yearly discretionary income on loan repayments and by allowing borrowers in economic hardship to have their loans forgiven after 20 years.
The College Cost Reduction Act includes a number of other provisions that would ease the financial burden imposed on students and families by the cost of college, including:
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Tuition assistance for excellent undergraduate students who agree to teach in the nation’s public schools;
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Loan forgiveness for college graduates who go into public service professions;
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Increased federal loan limits so that students won’t have to rely as heavily on costlier private loans; and
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New tuition cost containment strategies.
President Franklin Roosevelt signed the GI Bill into law in 1944. The original law enabled 7.8 million World War II veterans to participate in education or job training programs.
A broad coalition of student advocacy groups and labor organizations support the key provisions of the College Cost Reduction Act, including increasing Pell Grant scholarship aid and lowering interest rates on need-based student loans. To see their letters of support from student associations click here. To see letters of support from other organizations, click here.
For a fact sheet on the legislation, click here.
To see who would benefit from the legislation, click here.
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