In what was basically a pep rally for improving access to college Thursday, Democratic lawmakers highlighted legislation that would halve student interest rates on subsidized Stafford loans and, again and again, heralded the bill as a “first step” in the new majority’s plans to deal with issues of college affordability.
“You demanded that we reverse the raid on student aid. I’m telling you that we will fulfill that promise,” Rep. George Miller (D.-Calif.), the new chairman of the House Committee on Education and Labor, said in reference to $12 billion in savings that were squeezed from the student loan programs last year as part of the Higher Education Reconciliation Act.
H.R. 5, which is set to be formally introduced today and for a House vote on Wednesday, is one of six provisions under consideration in the Democrats' first 100 hours of legislative activity. It would reduce lender subsidies, with a focus on the largest providers of loans, and use those funds to cut the interest rate on subsidized student loans for first-time borrowers from 6.8 to 3.4 percent over the next five years. An analysis by U.S. PIRG estimates that the average four-year college student with subsidized loans starting school in 2011 or beyond would save $4,420 over the life of a loan. For those closer to college age, a student starting school this fall, for instance, could expect to save about $2,280. The Project on Student Debt released a similar analysis Thursday.
The lawmakers speaking at Thursday ’s press conference on Capitol Hill repeatedly mentioned other agenda items they hope to pursue. Sen. Edward M. Kennedy (D.-Mass), the new chairman of the U.S. Senate Committee on Health, Education, Labor & Pensions, described plans to increase the maximum Pell Grant award from $4,050 to $5,100, cap student loan payments at 15 percent of a borrower’s discretionary income, forgive student loan debt for individuals who continue in public service careers for 10 years, and generate $13 billion in additional need-based aid by reforming the student loan programs to encourage the use of the less expensive direct loan program.
Some in higher education, however, have quietly questioned the Democrats' decision to tackle cutting interest rates before pushing for more Pell funds for the neediest students, and have wondered how much money will really be left for Democrats to fund the rest of the laundry list.
When asked about that topic, Jennifer Pae, president of the United States Student Association, repeated the mantra of the day: “This is a pivotal first step.” Increases to Pell Grants, which have been stagnant for five years, and restoration of funding for programs like Upward Bound, are also on her group’s agenda, she said.
Democrats have been pushing higher education leaders to get behind the rate cut, and Thursday, the American Council on Education and 16 other college groups sent a letter to Miller expressing their support for the idea -- though in less-than-effusive terms. "The College Student Relief Act will help an estimated 5.5 million low- and middle-income students and their families pursue their goal of a higher education," the groups wrote, managing to work in a line about their preferred priority. "We look forward to working with you to ensure its passage and to making significant progress towards our shared objective of achieving a $5,100 Pell Grant this year."
Lenders have criticized the effort to reduce interest rates by cutting several subsidies that the government pays to banks, saying that the cuts proposed to fund H.R. 5 would, on top of the $12 billion in cuts last year, amount to $20 billion -- jeopardizing “features of the program that make it the overwhelming favorite of students, parents and schools,” Kevin Bruns, executive director of America’s Student Loan Providers, said in a statement.
“Proposing to hit loan providers again may be good politics, but it’s the students and families they serve who would ultimately pay the price.”
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