On July 18, by a vote of 273-149, the U.S. House of Representatives passed legislation for an $18 billion college aid package, which its sponsors say will help millions of students and their families pay for college at no added cost to taxpayers. Those sponsors claim that the legislation will pay for itself by cutting federal subsidies paid to lenders in the college loan industry by $19 billion.
The College Cost Reduction Act of 2007 (H.R. 2669) represents the largest single investment in college aid since the G.I. bill in 1944, according to a release from Rep. Charles Rangel (D-New York). If signed into law, the legislation would cut interest rates on federally subsidized student loans from 6.8% to 3.4% over the next five years, and would cap a student’s loan repayment at 15% of the borrower’s yearly discretionary income.
As indicated by the release, the additional funding may have a particularly strong impact on African American and Latino students. Approximately 47% of all African-American students and 37% of Hispanic students receive Pell Grant scholarships each year, and as stated by the release, the legislation would increase the maximum value of the Pell Grant Scholarship by $500 over five years and expand the number of eligible students by almost 600,000. When combined with other Pell scholarship increases passed or proposed by Congress this year, the maximum Pell Grant would reach $4,900 in 2008 and $5,200 in 2011, up from $4,050 in 2006, according to Rangel.
The bill will also provide $4,000 to $16,000 tuition assistance per year to undergraduate and graduate students who commit to teaching in American public schools. Public servants would receive loan forgiveness of $5,000, with certain public sector employees receiving complete loan forgiveness after 10 years of service. It would also increase federal loan limits so that students won’t have to rely as heavily on costly private loans.
On July 20, the U.S. Senate approved its version of The College Cost Reduction Act by a bipartisan majority of 78-18. The differences between the two versions must now be reconciled.