$20 billion in ed funding slashed from student aid legislation


Despite the changes to the final version of the lending bill, education organizations lauded major steps taken by Congress and supported by the White House.

The measure rewrites a four-decades-old student-loan program, eliminating its reliance on private lenders and using the savings to direct $36 billion in new spending to Pell Grants for students in financial need.

In spite of last-minute efforts by Republicans to derail the federal measure, Democrats on a party-line vote sent the higher-ed aid bill to the White House to be signed into law.

The legislation was paired with the expedited health-care bill, a marriage of convenience that helped the prospects of each measure.

“We are pairing this historic health reform with another opportunity that cannot be missed—the chance to make the single largest investment in college affordability ever at no cost to the taxpayers,” said Rep. George Miller, D-Calif.

Under the college lending program, financial institutions provide college loans at low interest rates, while the government guarantees the loans in the event of default and subsidizes private lenders when necessary to keep rates low.

“By moving to the federal government’s direct loan program, we will put the best interests of students first and make college loans more reliable and affordable,” said Rep. Ruben Hinojosa, D-Texas, the chairman of a House higher-education subcommittee.

In addition to using the projected savings from that change for Pell Grants and higher-education institutions, the legislation will direct about $19 billion for deficit reduction and to offset expenses in the health-care legislation.

Besides increasing Pell Grants, the law will provide $1.5 billion to make it easier for student borrowers to repay their loans.

Beginning in 2014, borrowers won’t be required to devote more than 10 percent of their monthly income to repay student loans. The current cap is 15 percent.

Still, the legislation is not as generous as the bill the House passed last year.

The bill had anticipated far more spending on community colleges and had called for increasing the Pell Grants each year by the consumer price index plus 1 percent. Democrats had to scrap the additional 1-percent increase.

Now, the law contains no increases in Pell Grants over the next two years and a modest increase over the five years that follow. The maximum Pell Grant, which a House-passed bill last year would have raised to $6,900 over 10 years, now will increase only to $5,900.

The current maximum grant for the coming school year is $5,500.

Mark Kantrowitz, publisher of the student loan web site FinAid.org and author of two books about student financial aid, criticized the $400 increase in Pell Grants in a blog post March 23. Kantrowitz, in an interview with eCampus News in February, said Congress would have to raise Pell Grants to $10,000 per student to increase the number of college graduates.

“The increases in the maximum Pell Grant are anemic,” Kantrowitz wrote. “Not only does this fail to keep pace with tuition inflation, but the maximum grant will decrease on a constant dollar basis.”

He added: “Current students will not notice much of a difference because of the legislation.”

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