Combined with the historic health care reform bill which passed in the House yesterday, was another bill which promises to help college students who receive financial aid. The Student Aid and Fiscal Responsibility Act (H.R. 3221) also known as the Student Aid Bill, eliminates subsidies which were given to private lenders who gave federally guaranteed student loans to college students. The measure represents the single largest investment in federal student aid in history, and includes many of President Obama’s key education initiatives.
The student aid bill that passed in Congress in the final reconciliation package will revitalize the federal financial aid system. The federal financial aid system was created to make sure that, regardless of financial background, every student would be able to access a college education. But in the last decade, almost 4.5 million qualified high school seniors chose not to apply to college because the level of debt they would incur was too great. Today, two-thirds of college graduates are in debt with an average debt level of $23,200.
As a result of the bill, private lenders would no longer make federally subsidized student loans. Instead the government would make all such loans itself. Eliminating the middleman would save the government an estimated $61 billion over the next decade. The Bill is fully paid for and reduces the deficit by at least $10 billion over 10 years.
The legislation is expected to:
- Make college more affordable for millions of students by investing a total of $36 billion into the Pell Grant program over 10 years. The bill increases the maximum award from $5,500 next year to nearly $6,000 over the years ahead. If the bill had failed, the maximum Pell grant would have dropped to about $2,150, less than half the $5,500 maximum projected for next year.
- Protect students’ Pell Grant scholarships from the upcoming budget shortfall. The provisions will direct $13.5 billion of the $36 billion Pell Grant investment to address most of the gap needed to ensure there is not a dramatic cut in Pell grant funding in 2011. It was predicted that if this gap was not addressed, students would see a decrease in aid of almost 60 percent and nearly 600,000 students would lose the benefit entirely.
- Keeps jobs in America. Rather than force private industry out of the system, lenders will compete for contracts to service all federal student loans, which will guarantee borrowers high-quality customer service and preserve jobs. Unlike loans made by private banks, direct government loans must be serviced by U.S. workers. Last year Sallie Mae was forced to bring 2,000 jobs back to U.S. soil to win a direct loan servicing contract.
- Invest $2.55 billion in Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other Minority-Serving Institutions.
- Make federal student loans more manageable to repay by strengthening an Income-Based Repayment program which reduces the cap on borrowers’ monthly federal student loan payments from 15% to 10 % of their discretionary income after 2014.
- Give students the support they need to stay in school and graduate. The provisions invest $750 million in the College Access Challenge Grant (CACG) program which provides grants to organizations which help students acquire the skills they need in order to succeed in college and manage their student loans, such as financial literacy and debt management skills.
- Prepare students and workers for competitive jobs by investing $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs.
“This is good for students, taxpayers, and American jobs,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.”
By riding shotgun on the fast-track health care bill, both bills are expected to move quickly through the Senate where, under reconciliation, they will be debated for a maximum of 20 hours, and require a simple majority for passage.