Every year, some 200,000 students are unable to attend college because they can’t afford the cost. But this week Congress is sending to the President’s desk legislation that provides the largest increase in college financial aid since the GI Bill of Rights of 1944. It will help millions of students and families pay for college – and doing so at no new cost to U.S. taxpayers. The President has said that he will sign the bill into law.
This new investment in college financial aid is critically important. In today’s economy, a college education is as important as a high school diploma was a generation ago. Yet, college costs have grown nearly 40 percent in the last five years. Students are graduating from college with more debt than ever before. And many would-be students are holding off on going to college, or skipping it altogether, because they don’t believe they can afford it.
The College Cost Reduction and Access Act, passed by Congress and awaiting the President’s signature, will boost college financial aid by more than $20 billion over the next five years. The bill pays for itself by cutting excessive federal subsidies to lenders in the college loan industry by $20.9 billion. It also includes $750 million in federal budget deficit reduction.
By significantly boosting scholarships and making loans more affordable and manageable, this bill makes an historic investment in our nation’s college students, our economic competitiveness, and our future — in a fiscally responsible way.
To reduce the cost of loans for millions of student borrowers, the legislation will cut interest rates in half on need-based student loans, from 6.8 percent to 3.4 percent over the next four years. Once fully phased in, this will save the typical student borrower – with $13,800 in need-based student loan debt — $4,400 over the life of the loan. About 6.8 million students take out need-based loans each year.
In addition, the legislation will 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.
In a critical step to expand access to college, the bill will increase the maximum Pell Grant scholarship by $490 in 2008 and by $1,090 over the next five years. This will restore the purchasing power of the Pell Grant – raising the scholarship from $4,050 in 2006 to $5,400 by 2012, benefiting the 5.5 million students receiving Pell Grants. Of these, 74 percent have family incomes below $30,000.
The College Cost Reduction and Access Act also includes a number of other provisions that will ease the financial burden imposed on students and families by the cost of college, including:
* Making a landmark new investment of $510 million over the next five years in Historically Black Colleges and Universities, Hispanic-Serving Institutions, and other minority-serving institutions.
* Providing upfront tuition assistance of $4,000 per year – for a maximum of $16,000 – for excellent undergraduate students who commit to teaching in public schools in high-poverty communities or high-need subject areas.
* Encouraging and rewarding public service by providing loan forgiveness after 10 years of public service and loan payments for military service members, first responders, law enforcement officers, firefighters, nurses, public defenders, prosecutors, early childhood educators, librarians, and others.
In short, the College Cost Reduction and Access Act is one of the most critical bills the 110th Congress will enact – making college more affordable and accessible for millions of American students, strengthening our workforce, and stimulating our economy.