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WASHINGTON – A bill to help millions of students and families pay for college, at no new cost to taxpayers, became law today. The bill originated with the budget resolution for fiscal year 2008, which U.S. Rep. John Spratt (D-SC) drafted as Chairman of the House Budget Committee.
Spratt called this “a happy occasion where good policy is also good for the budget’s bottom line. The College Cost Reduction and Access Act is a reconciliation bill, which will actually reduce the federal government’s budget deficit at the same time that it makes college more affordable for millions of students.”
The final bill complies with the budget resolution for fiscal year 2008, which instructed the House Committee on Education and Labor to cut spending under its jurisdiction by $750 million by 2012. By passing this measure, the House maintains both a tough “pay-as-you-go” rule and a rule not allowing reconciliation to increase the deficit that the House instituted for the 110th Congress. These rules require Congress to make tough choices to meet priorities while restoring the budget to balance, and the House has insisted on enforcing these rules in every case.
The final legislation combines key elements from House and Senate bills that were passed in July. It would boost college financial aid by more than $20 billion over the next five years. The bill pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry.
“Higher education should be as accessible as high school, and passage of this bill makes that more likely,” Spratt said.
Under the legislation, the maximum Pell Grant would increase by $1,090 over the next five years, reaching $5,400 by 2012. This increase would fully restore the purchasing power of the Pell Grant, which in recent years had been frozen at $4,050 until Congress boosted its value to $4,310 earlier this year. Close to 6 million low- and moderate-income students would benefit from this increase.
To reduce the cost of loans for millions of student borrowers, the legislation would 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 would 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 would 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 and by allowing borrowers in economic hardship to have their loans forgiven after 25 years.
The College Cost Reduction and Access Act also includes a number of other provisions that would ease the financial burden imposed on students and families by the cost of college, including:
• Tuition assistance for undergraduate students who agree to teach in the public schools in poverty areas;
• Loan forgiveness after 10 years of public service and loan repayment for college graduates that go into vital public service jobs; and
• Strategies to help colleges contain costs and make online information on college costs for students and parents more user friendly.
“This bill is the largest single investment in college financial aid since the GI Bill, and one of the best investments we can make,” Spratt said.
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