Once President Bush approves the new College Cost Reduction and Access Act, it will become the largest investment in student federal aid since the GI Bill.
According to Congress, this new law will help lower college costs of many students by providing financial help. The College Cost and Access Act will actually cut subsidies to the lender and will redirect money into Pell grants.
“The situation now is this: The government has been given subsidies to lenders for a certain amount,” said Sandra MacNevin, associate vice president for Governmental Relations. “So, now they [government] are saying we will still provide these subsidies, but at a lower level.”
MacNevin also said the Senate passed this law on a 79-12 vote, with the House agreeing by an equally overwhelming vote of 292-97.
MacNevin mentioned that under the Federal Family Education Loan, private sector lenders are paid a subsidy to make student loans with favorable interest rates and repayment provisions. President Bush proposed to cut these subsidies in his fiscal year 2008 budget and the democrat-controlled Congress was happy to adopt the suggestion. The final bill went further than the president requested and cuts $20 billion in subsidies. Lenders have vigorously opposed the measure and have emphasized that cuts of this magnitude will have serious consequences for the services that institutions and borrowers receive.
“My associate colleagues and I believe that the significant increase in Pell Grants, an overdue and welcome development,” MacNevin said.
Together with her colleagues, they sent a letter to all members of the House and Senate supporting the legislation.
A list of major provisions to the bill, prepared by the House Education and Labor Committee:
– Subsidies paid to for-profit lenders will fall by .55 percent and by .40 percent to non-profit leaders.
– Most of the savings will be used to help the Pell Grant program from the current level of $4,310 to $4,800 in the 2008-09 school year.
– Other savings from the subsidy will go to the reduction of interest rates on new federal student loans.
– In order to help students manage repayment, student loan payments will be limited to a reasonable percentage of income to assist borrowers who are unable to repay loans.
– The Department of Education will craft a plan to auction off the right to make loans under the federal Parent Loan for Undergraduate Students program.
– Students enrolled in teacher preparation programs will be eligible for new $4,000 grants that would convert to loans should the individual not serve as a full-time teacher for four years within eight years of receiving a teaching credential.
“Taken together, this bill makes the largest changes in the FFEL program since it was established as the Guaranteed Student Loan program in 1965,” MacNevin said.
