Friday, September 07, 2007

Congress Approves Student Loan Overhaul

We believe this bit of news is timely for the blog since many of the undergraduate members depend on student loans to pay for at least part of their college expenses.
Congress gave final approval to a broad overhaul of federal student loan programs today, sharply cutting subsidies to lenders and increasing grants to needy students.

In quick succession, both the House and Senate approved the changes, allowing Democrats to say they had made good on one of their campaign promises last year to ease the strain of rising college costs. In the Senate, the bill passed 79 to 12, reflecting broad bipartisan support, while in the House it passed in a voice vote.

The Education Secretary, Margaret Spellings, said that she was recommending that President Bush sign the bill because it “answered the president’s call to significantly increase funding” for Pell grants for low-income students. The administration had issued a veto threat against an earlier House version of the legislation.
[...]
The legislation, hammered out in a House-Senate conference committee this week, alters many of the ground rules for financing higher education, offering forgiveness on student loans to graduates who work for 10 years or more in public service professions like teaching, firefighting and the police, and limiting monthly payments on their loans to 15 percent of their discretionary income. It also raises the maximum Pell grant, the basic federal grant for middle- and low-income students, to $5,400 from its current level of $4,310 over the next four years. To pay for the changes it slashed federal subsidies to lenders by roughly $20 billion.
[...]
Representative George Miller of California, the Democratic chairman of the House education committee, said that last year, Republicans took nearly $12 billion from student Pell grants. “We took $11.39 billion and put it back into Pell grants,” Mr. Miller said. “That’s the difference that an election makes.”

Campaign trail promises aside, the changes reflect the steep and sudden decline in the fortunes of the $85 billion student loan industry, after years of generous subsidies and support in Congress. Investigations by Congress and the New York attorney general revealed a series of potential conflicts of interest as lenders had provided free travel, gifts, and financial incentives to colleges and college officials in the hope they would steer student borrowers their way.
[...]
With the law, Congress is reducing federal subsidies to lenders by roughly $20 billion and gradually halving the interest rate on student loans over the next five years. Some $11.4 billion of that money will go toward stepping up Pell grants.

For the first time, the government will now auction off the right to make federally-backed educational loans to parents in each state, instead of setting the rate from Washington. The two lowest bidders will win the right to make subsidized college loans to parents.
As always, the devil is in the details and the law of unintended consequenses is sure to apply. As a general principle however, any legislation that makes it easier to attend and pay for college is a pretty good thing.

Could it possibly be that the "Repugnicans" and "Demoncrats" are figuring out how to work together? Nah, that's way too much to hope for.

Congress Approves Student Loan Overhaul - New York Times