Last Friday, Congress approved legislation that will provide the largest increase in federal student aid since the GI Bill. The Bush administration had threatened a veto against the House version of the bill, but after compromise legislation was drafted, President Bush withdrew his veto threat.
The bill (H.R. 2669, The College Cost Reduction and Access Act) would slash government subsidies by almost $21 billion to student-loan companies and use the savings to reduce the federal deficit, raise the maximum Pell Grant to $5,400 by 2012, and halve the interest rate on subsidized student loans from 6.8 percent to 3.4 percent. It also simplifies the financial aid process for low-income students by increasing the income level at which a student is automatically eligible for the maximum Pell.
In addition, the bill will make several changes aimed at helping borrowers who have taken on unmanageable levels of debt, including capping monthly loan payments at 15 percent of discretionary income and creating a new loan-forgiveness program for direct-loan borrowers who go into public service. It also protects student workers by ensuring they are not penalized by increasing the amount of student income that is sheltered from the financial aid process. It increases funding for the Department of Education’s Upward Bound, a key college access program, and creates College Access Challenge Grants to increase college outreach activities in every state. The bill also establishes new TEACH grants to provide scholarships of $4,000 per year for high-achieving undergraduate and graduate students who commit to teaching in a high-need subject in a high-need school.
The Higher Education Act reauthorization has been split into two bills and this reconciliation legislation is the first. The second bill will address non-spending higher education issues such as new reporting requirements, accreditation, and measuring student learning outcomes. The Senate has already passed its broader Higher Education Act reauthorization bill and the House is under considerable pressure to unveil a companion piece of legislation.
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