Higher Education
Tips on how to apply for federal student loans and grants »
Key Legislation:
Student Aid and Fiscal Responsibility Act of 2009 »
American Recovery and Reinvestment Act »
The Ensuring Continued Access to Student Loans Act of 2008 »
Higher Education Opportunity Act of 2008 »
College Cost Reduction and Access Act »
Student Loan Scandal »
College Student Relief Act »
The committee has held seven hearings on the reauthorization of the Elementary and Secondary Education Act (currently known as No Child Left Behind) during the 111th Congress. Chairman Miller has consistently stated his belief that the key to long-term economic recovery is a strong public education system. Richmond Confidential reported:
“‘In the middle of this economic chaos,’ [Miller] said, ‘this president knows we can’t compete in a world economy unless we modernize some of our basic systems.’”
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“Creating a new standard educational model should incorporate the way that young people share information, he said.
“‘All of you create a huge amount of content every day, you teach your peers how to use that new phone, that new program,’ he said. ‘How do we call on people to participate in the educational process who are your peers?’”
Miller also spoke about the rising cost of college and how many students struggle to attain a college degree -- he wrote the Student Aid and Fiscal Responsibility Act to make college more affordable by increasing federal financial aid and making federal student loans easier to repay. Richmond Confidential recorded his comments:
“‘About half the people that show up for community college, they don’t show up for the second year,’ Miller said. ‘They don’t get the certificate they’re after, they don’t get the career opportunity, they don’t get the academic degree they were after and they may end up in debt.’
“Miller spoke in detail about recent reforms to the student loan industry. Subsidies worth $60 billion will be diverted over ten years from banks, which manage loans, to students in the form of grants and federal loans.
“The new law, he explained, also rewards those pursuing public service jobs. ‘If you get in the public health and education sectors, after ten years your loans go away,’ he said, ‘because you’re giving something back.’”
The maximum Pell Grant was raised to a record $5,550 in 2010 due to the Student Aid and Fiscal Responsibility Act (SAFRA), authored by Chairman Miller and signed by President Obama in March. Not only has Miller worked to increase federal financial aid, he has made college loans more affordable – the College Cost Reduction and Access Act of 2007 has lowered interest rates on need-based student loans from 6.8 percent to the current 4.5 percent. The rates will drop again to 3.4 percent in July 2011.
Springfield, Ohio’s Springfield News-Sun wrote that the number of undergraduates relying on Pell Grants has increased:
“An increasing number of students locally and nationally have been receiving financial aid through the Federal Pell Grant Program.
“In Clark County, the recipients of the need-based grant increased more than 5,500 students between academic year 2008-2009 and 2009-2010, according to statistics from the U.S. Department of Education. In the same time period, the grant disbursement increased by $26.9 million.”
The Herald Sun of Durham, North Carolina had similar news to report:
“According to recent figures issued by the U.S. House Committee on Education and Labor, the number of Pell Grant recipients in North Carolina's 4th Congressional District rose 35 percent last year. The district, which includes all of Durham and Orange counties and parts of Wake and Chatham, had 27,471 students who qualified for the aid during the 2009-10 academic year, an increase of 7,145 over the year before.”
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“Adding to the increase is that under a new student-loan bill signed by President Barack Obama in March, the Pell's Grant's eligibility criteria have changed, and that's made it a little easier to qualify than in the past, Ort and Rome both said.
“Equally important is that the Pell Grant is now authorized for summer school, for the first time.”
Tips for Applying for Federal Student Aid
“Not since the explosive years of the civil rights movement and the hard-fought debut of government-supported health care for the elderly and poor have so many big things -- love them or hate them -- been done so quickly.
“Gridlock? It may feel that way. But that's not the story of the 111th Congress -- not the story history will remember.”
The AP specifically referenced many of Chairman Miller’s achievements when listing important legislation Congressional Democrats have passed, including “a giant step toward universal [health care] coverage”, “an economic stimulus package… to avoid a full-blown depression”, “making college loans more affordable” and “making it easier for women to challenge pay discrimination.”
Chairman Miller pledged in 2008 to keep the Education and Labor Committee focused on rebuilding and strengthening the middle class during the 111th Congress.
“In order to restore America's economic competitiveness and prosperity, the Obama administration has set a goal of once again having the highest proportion of college graduates in the world by the year 2020 -- 10 short years away. Community colleges are central to this effort, and the president has specifically called on community colleges to help an additional 5 million Americans earn degrees and certificates in that time. Our challenge is to help these institutions meet the pressing education and job training needs of millions of students working to achieve the American dream. Students just like the ones in my classroom, whose lives are changed by the confidence and opportunity they gain from a quality education.”
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“In the coming months, we will announce the first $500 million of a $2 billion, four-year investment in community colleges authorized by Congress and signed into law on March 30. This federal investment will support new state-of-the-art education, training and skills development programs to help out-of-work Americans re-enter the job market with increased knowledge and more marketable skills. The funds will enable community colleges to work with universities, business, government and unions to develop career pathways leading to more college graduates ready for the workforce as our economy recovers. In addition, through the American Recovery and Reinvestment Act, the Obama administration has invested billions of dollars specifically in community colleges.”
Earlier this year, the Democratic Congress passed the Student Aid and Fiscal Responsibility Act, a law that invests $500 million a year in community colleges for the next four years. All students -- including those who are returning to school after being in the workforce -- will have access to high-quality, low-cost higher education. More courses will be available, at times that work for students.
Click on the state or territory below for Pell Grant award totals and number of recipients for academic year 2008-09 and preliminary figures for academic year 2009-10, organized by congressional district. (Source: U.S. Department of Education)
States
DC and U.S. Territories
“An estimated 70,000 UC undergraduates are receiving federal Pell grants, which typically are awarded to students with family incomes below $50,000. According to the report, that is the largest number in UC history and represents 39% of its undergraduates, up from 35% last year.”
Last year, the Democratic Congress raised Pell scholarships to their highest level in history, $5,550 in 2010. The increase in federal financial aid was part of the Student Aid and Fiscal Responsibility Act (SAFRA), legislation drafted by Chairman Miller. SAFRA will help the country reach President Obama’s goal of producing the most college graduates by 2020 by helping make college affordable for American families.
University of California President Mark Yudof shared his news by visiting Grant Union High School in Del Paso Heights, Calif., telling students that a college education is not out of reach. The Sacramento Bee heard reaction from students:
“‘I'm from a low-income family and this makes me want to go to college even more,’ said Grant High junior Alana Gerasimchuk. ‘It makes me confident that I can go to UC Berkeley.’
“Former Grant High student CrystalKay Fairrington said it's important for kids in Del Paso Heights and other communities to know there are opportunities out there. Fairrington, who also spoke at the pep rally, attends UC Berkeley.
‘Students think it's beyond their reach, and it's not,” she said.”
“I applaud Congressman Cohen and the other members of the subcommittee for their decisive action to restore fairness and to protect students. This legislation reverses a Republican loophole that protected for-profit lenders and slighted student borrowers. This legislation finally and rightfully puts students’ needs above special interests and lobbyists. It is a clear, common sense step in the right direction to stand up for students and borrowers. I look forward to voting for this legislation when it comes to the House floor. It's a victory for students and families struggling to pay for college in this economy.”
For more information about the legislation, click here.
With students returning to college across the nation, many of them are facing rising costs of tuition and books. The Daily Collegian of Penn State reports today on changes to federal students loans that make higher education more accessible and affordable for students.
Katrina Wehr writes:
The law, which was included in the health care reconciliation bill passed in March, simplifies the student loan process, therefore preventing students from accumulating unmanageable debt after graduation, Miller said.Learn about student loan reform and what's in it for you. Also, learn to separate the myths from facts about the Student Aid and Fiscal Responsibility Act.
"No one should have to mortgage their future to go to college," Miller said. "That's just unacceptable."
In an effort to meet President Barack Obama's goal of producing the most college graduates in the nation's history by the year 2020, SAFRA introduced an increase in funding for Pell Grants -- as the Consumer Price Index's cost of living increases, so will the monetary value of the grants.
He said the law also lowers caps on monthly loan repayments.
Beginning in 2014, borrowers who qualify for income-based repayment on their loans will be able to cap their payments at 10 percent of their monthly income, Miller said. Prior to the switch, the cap was 15 percent, Miller said.
What is the new federal student loan interest rate?
Continue reading for the answer.
- 4.25%
- 4.5%
- 5.5%
- 6.25%
The Student Aid and Fiscal Responsibility Act, written by Miller, became law on March 30, 2010 as part of the Health Care and Education Reconciliation Act of 2010. The law, which saves taxpayers $61 billion over 10 years by switching to the more efficient Direct Loan program, will help America reach President Obama’s goal of producing the highest proportion of college graduates by 2020. Miller wrote:
“We’ve taken important steps to ensure the stability of the student loan programs, to make college more affordable and help families and students manage their student loan debt.
“First, we increased the efficiency of the loan program so that we have more to invest in our students, and we increased the reliability of the programs so that students and families are never again left wondering where to turn in a difficult economy.
“Earlier this year, as part of the historic health care legislation, we made the single largest investment in federal student aid ever and transformed the way student loans programs operate.
“With President Obama’s direction we made the common-sense decision to stop wasting taxpayer money on subsidies to big banks and instead use that money to invest directly in students.
“By making the switch to direct lending, we saved $61 million that we gave directly back to the student. We raised the Pell grant scholarship, we made it easier for borrowers to repay their loans, regardless of their income, and we invested in community colleges and historically black colleges and universities. Most significantly, we made all of these investments in students and our economic future at no cost to taxpayers.
“Second, too often recent graduates look beyond careers in public service because they worry they will not be able to afford to pay back their loans. Recognizing this struggle, we made it easier for students to consider careers in public service.
“Under a program passed in 2007 as part of sweeping college affordability legislation, college graduates who enter into public service careers, such as teachers, public defenders and prosecutors, are eligible for complete loan forgiveness after 10 years of qualifying public service and loan payments. At a time when Americans’ interest in public service jobs is surging, this program is especially helpful.
“Third, we instituted a means for students to repay their loans that caps borrowers’ monthly loan payments at just 15% of their discretionary income. After 25 years in the program, borrowers’ debts will be completely forgiven.”
“Take, for example, a recent graduate with $30,000 in federal student loans and a starting salary of $25,000. Under this repayment program, this borrower’s monthly loan payment would be $110--one-third of the $345 monthly payment under a standard plan.
“Starting in 2014 new borrowers who are eligible for this repayment program will be able to cap their monthly loan payments at just 10% of their discretionary income. Borrowers who responsibly make their monthly payments will see their remaining balance forgiven after 20 years of repayment.”
The Wall Street Journal writes today about the new rules for student loans.
Some parents and students may also see lower interest rates on new loans. Now that all Parent PLUS loans are under the Direct Loan Program, the fixed rate for new Parent PLUS loans is 7.9%. Some lenders had charged 8.5%.
And the fixed rate has dropped, to 4.5% from 5.6%, for new subsidized Stafford loans for undergraduates. With subsidized loans, the federal government pays the interest on a loan while the student is in school, during the grace period after graduation or if the loan is in deferment, which is when borrowers are temporarily allowed to stop making payments.
The Department of Education also has increased the maximum Federal Pell Grant award to $5,550 for the 2010-2011 academic year, from $5,350 for the 2009-2010 school year.
As Investopedia pointed out, the reforms eliminate the middleman, enlarge Pell Grants, increase funding for minority-serving institutions, lower income-based payments, and offer more forgiveness opportunities.
Learn more about how reforms to federal student loans help students, families and taxpayers.
Below is a statement from Education and Labor Committee Chairman George Miller, author of the Student Aid and Fiscal Responsibility Act:
“Secretary Duncan has taken an important step forward today for America’s workers and the future of this country. By getting this money out the door quickly, he’s accomplished the critical tasks of both helping to save jobs and retrain and retain workers while also ensuring our student loan programs are operating in the best interest of students and families working hard to pay for college.”
Read the Department’s full release.
More information about investments in students and families.
But before you even think about a private loan, make sure you have maxed out on your federal student loans. Federal student loans have fixed interest rates and more flexible repayment terms than private loans. If you have trouble making payments after you graduate, the federal government offers several programs that provide relief (more on this later). Private lenders aren't required to do anything to help troubled borrowers.Additionally, the maximum Pell Grant increased to $5,500.
All PLUS loans (Parent Loan for Undergraduate Students) are now issued through the Direct Loan program. Like Stafford loans, these loans were previously offered by private lenders, as well as through the Direct Loan program. The rate for Direct PLUS Loans is 7.9% vs. 8.5% for FFEL PLUS Loans. Parents can use PLUS loans to pay for any college costs that aren't covered through Stafford loans and financial aid. Graduate students are also eligible to borrow through the PLUS program.
Rates for subsidized Stafford loans, which are available to borrowers who demonstrate economic need, fell to 4.5% from 5.6%. This new rate will apply only to subsidized Stafford loans issued between July 1, 2010, and June 30, 2011, says Robert Murray, spokesman for USA Funds, a non-profit company that services loans. Rates on subsidized loans issued before July 1 won't change, he says. The rate for unsubsidized Stafford loans, which are available to all students, remains at 6.8%.
Origination fees for Direct Stafford loans dropped to 1% from 1.5% on July 1. Because the cost of the fee is deducted from the proceeds of the loan, the reduction will increase the amount of money available to pay your college costs, Murray says.
But current students aren't the only ones who benefit. There is help for graduates, too.
Learn more about the July 1, 2010 federal student loan benefits.
Other changes that took effect July 1 could provide relief for graduates who aren't making enough money to afford their loan payments.
The income-based repayment program allows federal student loan borrowers to have their loan payments reduced, based on income and family size. For most eligible borrowers, loan payments will be less than 10% of their income. Two updates to the program could lower payments even more for some borrowers:
Married couples will no longer be penalized. Previously, when couples filed a joint tax return, the program assumed that both spouses could use 100% of their combined income to make loan payments. In cases in which both spouses had student loans, the minimum payments were much higher than the minimum for unmarried borrowers with the same debt and income, says Lauren Asher, president of the Institute for College Access and Success. The new formula will take into account married couples' combined income and their combined debt to calculate minimum payments, Asher says.
Eligibility for income-based repayment will be based on the balance when the loan went into repayment or the current loan amount, whichever is greater. This will primarily benefit borrowers who have gone into forbearance or deferment, Asher says. These programs allow borrowers to temporarily suspend payments, but if interest accrues during the period, they end up with a larger loan balance.
The cost of paying for college has become a heavy burden for many Americans. Young people and adults across country are pursuing higher education in record rates, but even as the economy recovers, American families are still struggling to pay tuition bills. The cost of college, moreover, continued to rise during the economic downturn and currently shows no sign of slowing.
Given these challenges, it’s critical for current college students, new or soon-to-be graduates, and workers to know about new benefits that go into effect July 1, 2010 to make student loan payments manageable for millions of Americans. From eliminating wasteful subsidies to private bankers and switching to a system of direct lending of federal student loans to increasing the maximum Pell Grant scholarship, to reducing the monthly payment borrowers must pay back on their loans, this Democratic Congress has made historic investments in our economic future – all at no cost to taxpayers.
Specifically, borrowers will see the following changes go into effect:
One of my top priorities in Congress is making higher education more affordable. Especially in this difficult economic climate, when competition for jobs has increased at the same time that many students’ ability to pay for college has decreased, it is important for the federal government to make smart investments in our students. These investments will make our young people – and our economy – more competitive in the global marketplace. That is why I am proud to be a member of the House Education and Labor Committee, where I have the opportunity to advocate for students in Southern Nevada and across the country. The Education and Labor Committee and Congress have done tremendous work over the last few years in making a higher education more affordable and accessible to students than ever before, and this summer we will see some of the effects of those changes.
For example, starting today, students will see lower interest rates on their student loans, down to 4.5% from 5.6%. This change will result in substantial savings for students over the life of their loan. For 2010 we have raised the maximum annual Pell Grant scholarship to $5,550; the maximum Pell Grant will continue to increase in the years to come, up to $5,975 by 2017. And this summer all new federal student lending will be converted to the effective and cost-efficient Direct Loan program. Instead of providing banks with taxpayer subsidies, students will receive loans directly from the government, saving taxpayers $61 billion.
Tips for Applying for Federal Loans and Grants
Credit hours are used to determine the amount of federal aid for which a student is eligible. Accrediting agencies recognized by the Department of Education are intended to ensure that institutions provide quality content and academic rigor at the postsecondary level. The Inspector General found that in one case an accrediting agency approved an institution of higher education for accreditation even though its evaluators noted the institution had an “egregious” credit hour policy and granted students an inflated number of credit hours for certain education programs.
On Wednesday, June 16, Chairman Miller will urge the Senate to put the 401(k) fee disclosure provision back into H.R. 4213 by delivering pies to each Finance Committee Senator with a slice missing representing the fees Wall Street takes from accountholders.
The 401(k) fee disclosure provisions were part of the American Jobs and Closing Tax Loopholes Act (H.R. 4213), important legislation that the House of Representatives approved and sent to the Senate on May 28. Last week, Sen. Max Baucus introduced proposed changes to the legislation that included the elimination of the requirement that 401(k)-type plans disclose all fees that participants pay.
On Thursday, June 17, 2010, the Committee will hold a hearing to examine recent reports from the Inspector General of the U.S. Department of Education looking at how higher education accrediting agencies review institutions’ policies on credit hours and program length.
WHAT:
“Hearing on “The Department of Education Inspector General’s Review of Standards for Program Length in Higher Education”
WHO:
Witnesses TBA
WHEN:
Thursday, June 17, 2010
10:00 a.m. EDT
Please check the Committee schedule for potential updates »
WHERE:
House Education and Labor Committee Hearing Room
2175 Rayburn House Office Building
Washington, D.C.
Note: This hearing will be webcast live from the Education and Labor Committee website.
Specifically, these provisions will:
- Invest the bill’s savings to make college affordable and help more Americans graduate
- Provide reliable, affordable, high-quality Federal student loans for all families
- Meet Pay-As-You-Go fiscally responsible principles and reduce the deficit
Sign up for the EdLabor Insider newsletter to get timely updates.
Subscribe to our YouTube channel to see more informative videos such as this one.
PREPARED FOR THE USE OF THE COMMITTEE ON EDUCATION AND LABOR OF THE U.S. HOUSE OF REPRESENTATIVES
Please note: This compilation of law is unofficial. It has been prepared by the House Office of Legislative Counsel for the use and convenience of the House Committee on Education and Labor. The official compilation of Federal law is the United States Code, and rules of evidence regarding the Code have been established by statute.
This compilation of law is current as of July 1, 2009.
More than 1,200 colleges in the United States serve predominantly minority populations.
Watch the three part video here.
On ESEA Reauthorization:
"We now have the opportunity to really take that rigid system and make a trade-in, if you will, of some additional flexibility at the local level for outcomes, for results. The Secretary [of Education] has made that clear, the President has made that clear, and I think we've made that clear in the series of hearings that we have held. We'd really like now to put more emphasis on better teachers, more emphasis on better leadership, more emphasis on the use of those resources and the flexible use of those resources, and really put teaching and learning and leadership back into the classroom, back into the local systems, and then stand back and hold them accountable for those--for those results, and we're getting a lot of encouragement as we've held our hearings."
On Higher Education:
"And what we tried to address ... was to see whether or not we could bring down the cost of college for families with an increase in the Pell Grant, by lowering the interest rates on student loans over the next couple of years, and then make it easier for the students and the families to manage that debt that they're required to take out to get the degree that they desire. And one of the ways we do that is we have--we let them have an income determinant payment system. How much you pay every month depends upon how much you're making. So, if you start a career with a low entry wage, you can still have that career and you can manage your payments.
"If you go into public service or you work for a non-profit, if you want to become a nurse, a doctor, a teacher, a prosecutor, a public defender and you're working for a public agency, in ten years, your loans go away, and you never have to pay more than 10--10 percent of your discretionary income to pay that loan back. All of a sudden, people can envision careers that otherwise they couldn't have, where they may really wanted to be a teacher, to be a health nurse, to be a physician's assistant, but they couldn't see how they could balance the pay and the education. We need those people, and so this is really in the public interest.
"We also--when we moved to the direct loan programs, it required the companies bring jobs back to America because they're now managing federal assets when they manage the repayment of these loans, and that requires people--that it be done here in America."
On Bipartisanship:
"There is--clearly, whether you're a Democrat or a Republican, you have a big interest in children. It's about our children, our neighbor's children, our constituents' children, it's about the country, and that passion is on both sides of the aisle, certainly in our Committee."
"The envelope arrives with good news. The college is pleased to announce that the student has been offered acceptance and, if he or she is fortunate, some scholarship money.
"But in this busted economy, more parents are saying they need more money and are filing appeals. Then the waiting starts again, for a phone call.
"The job of delivering that news — after weighing hopes and dreams against limited budgets — falls to people like Sandra J. Oliveira, the executive director of the financial aid office at Providence College."
Federal student aid is a key component in enabling many students to pay for college:
"'With the change in circumstance, they may get another $1,000, $2,000 in grant,' she said, using shorthand for a direct scholarship, as opposed to loans. Moreover, the precipitous drop in income will most likely qualify the family for a federal Pell grant, perhaps as much as $5,550."
Just a reminder: the maximum Pell Grant award was increased for the 2010 school year, thanks to the education reconciliation bill President Obama signed into law in March, which invests $36 billion over 10 years to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $5,975 by 2017.
The law also makes federal loans more affordable for borrowers to repay by investing $1.5 billion to strengthen an Income-Based Repayment program that currently allows borrowers to cap their monthly federal student loan payments at 15 percent of their discretionary income. These new provisions would lower this monthly cap to just 10 percent for new borrowers after 2014.
She writes:
"This was not a decision I made lightly," [Valisha Cooks] said. "Filing for bankruptcy was expensive and, most of all, humiliating. I was raised to work hard, pay my bills and be responsible." About $10,000 in other debt was erased. But not her student loans.Chairman Miller agrees with Ms. Singletary, which is why he's called for Congress to end special treatment for private student loan providers. "In 2008, the Democratic Congress took important steps to provide long overdue consumer protections for students when borrowing financially risky private student loans, but more needs to be done. Private student loans remain far more expensive for borrowers than federal student loans, and often carry tricky terms and conditions. Especially in this economy, private student loan borrowers deserve the same basic protections consumers receive when using their credit cards, buying a car, or paying their electric bill."
"Now, even though I have a good job, I can't afford to pay all my bills in any one month," Cooks told the [House Judiciary] subcommittee. "I go to food banks to feed my son, and I will never be able to afford a house." Like child support and tax debt, student loans are nearly impossible to eliminate in bankruptcy. You have to prove "undue hardship." That's a high hurdle to jump.
Before, the only loans that couldn't be canceled by filing for bankruptcy were federally backed student loans, as well as loans where nearly all the funds came from a nonprofit institution, according the National Association of Student Financial Aid Administrators. In the case of the federal loans, this made sense. The government backs the loans, and defaults are a direct hit to the federal budget, meaning we all pay for those who can't.
But in 2005, during a major overhaul of the bankruptcy code, private student loans were given an elevated status and thus couldn't be discharged. This didn't make sense. If we are going to have a fair bankruptcy system, private education loans should be treated the same as other private consumer debt. That's the risk lenders take, similar to the risk borne by providers of loans for cars, homes or other consumer purchases.
Lenders and opponents of this legislation argue that if people can erase their education debt, private loans for college will be tougher to qualify for and harder to get. There's a concern that people will get an education and immediately run to bankruptcy court to shed their loan obligations before they make big money.
I covered bankruptcy for years, and seldom did I see bankruptcy petitioners gleefully sitting in the corridors of a courthouse eagerly waiting to shirk their financial responsibility. People usually seek bankruptcy protection as a last resort. Besides, there is a test in place to prevent people from scamming the system.
Investopedia highlighted these 5 changes to federal student loans:
- Elimination of the Middleman
- Larger Pell Grants
- Increased Funding for Minority-Serving Institutions
- Lower Income-Based Payments
- More Forgiveness Opportunities
The Bottom LineLearn more about how reforms to federal student loans help students, families and taxpayers.
While cash-strapped college students (and their parents) will likely welcome anything that helps them manage those hefty tuition payments, many critics say these measures don't go far enough, especially considering several elements don't go into effect for several years. However, when coupled with recent changes to simply the FAFSA (the form students may complete to apply for federal aid) and the expansion of college-related tax credits, the new legislation may at least provide a little bit of a helping hand to families struggling to afford the overwhelming cost of higher education.
INCREASED THE MAXIMUM PELL GRANT AWARD TO $5,550 THIS YEAR: By 2017, the maximum Pell Grant is expected to be $5,975. The value of the Pell Grant had been shrinking—paying 75% of college costs in 1977, and just 33% last year.
MADE YOUR STUDENT LOAN REPAYMENTS MORE AFFORDABLE: Right now you can cap your student loan payment at 15% of your discretionary income, and any balances you have left after 25 years will be forgiven. For new borrowers starting in 2014, this goes down to 10% of your discretionary income, with balances forgiven after 20 years.
LOWERED STUDENT LOAN INTEREST RATES ON YOUR NEED-BASED LOANS: Subsidized Stafford loan rates have been dropping and will continue to decrease over the next two years, going down to 4.5% in the 2010-2011 school year and reaching 3.4% in the 2011-2012 school year.
INVESTED IN STUDENTS, NOT BANKS: By switching all schools to the more efficient Direct Loan program, the government will save $61 Billion over the next 10 years—money that will now be used to help you, rather than to give subsidies to banks.
MADE IT EASIER TO APPLY FOR FEDERAL STUDENT AID & PLAN FOR TEXTBOOKS: We streamlined the Free Application for Federal Student Aid (FAFSA) process down from 100 questions and created a two-page FAFSA-EZ form—giving families extra time to plan for college expenses. On textbooks, colleges are now required to provide you with advance information on textbook pricing to help you plan. And publishers must provide pricing information on “unbundled” versions of every “bundled” textbook they sell.
INVESTED IN COMMUNITY COLLEGES -$500 MILLION A YEAR FOR NEXT 4 YEARS: All students—including those who are returning to school after being in the workforce—will have access to high-quality, low-cost higher education. More courses will be available, at times that work for you.
INVESTED $3 BILLION IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES AND MINORITY-SERVING INSTITUTIONS: This can renew, reform, and expand programming to provide students with the support they need to stay in school and graduate.
ENCOURAGED TEACHING THROUGH TUITION ASSISTANCE AND REWARDED PUBLIC SERVICE THROUGH LOAN FORGIVENESS: You can receive up to $4,000 a year in up-front tuition assistance if you commit to teaching in a high-need school or subject area for four years after you graduate. If you work in public service or at a non-profit for 10 years, and make payments on your federal student loans during that time, any balances you have after 10 years will be forgiven.
What’s up next for Rasmussen? Gauging Americans’ job approval of the Tooth Fairy?
APRIL FOOLS: “49% think new student loan plan is a bad idea, 35% like it.”(Rasmussen headline)
When presented information on what the student loan reforms signed into law actually do, Americans strongly support it. The Student Aid and Fiscal Responsibility Act invests billions of dollars in students and families, at no costs to taxpayers. Not surprisingly, critics are using scare tactics to try to mislead the American public about this effort. They’re desperate to preserve the status quo – a system that for too long has favored banks at the expense of students and taxpayers.
APRIL FOOLS: “Under a newly approved law, students will borrow money directly from the federal government rather than through a private bank.” (Rasmussen poll question #3)
It’s ridiculous to argue this is a government takeover, when the federal student loan programs are already a federal program, established and subsidized by the federal government. The Federal Family Education Loan Program (FFELP) is broken and now depends on taxpayer dollars not just for subsidies that reimburse lenders when borrowers default on loans, but also for the capital to finance their lending activity altogether.
Taxpayers now fund 8.8 of every 10 dollars in federal student lending activity. They absorb all the risk. There is simply no reason to keep pumping taxpayer dollars into a broken system when the federal government can provide the same low-cost federal loans more reliably for students and at a lower cost for taxpayers.
APRIL FOOLS: “The government says it will save billions by cutting private banks out of the student loan process. How likely is it that the government involvement will save billions of dollars?”(Rasmussen poll question #4)
According to the nonpartisan Congressional Budget Office, but cutting out subsidies to big banks and switching to the cheaper Direct Loan program, the student loan reforms save taxpayers $61 billion over the 10 years. In addition to investing in college aid, these provisions will also reduce the deficit by at least $10 billion over 10 years.
Beginning July 1, 2010, all Federal student loans will be originated through the Direct Loan program. Students should contact their schools with any questions.
For a 1 year period (July 1, 2010 to July 1, 2011) current students who have FFEL loans with a lender and also have FFEL loans that were sold to the Department of Education, or also have Direct Loans, may choose to consolidate the loans while still enrolled in school into the Direct Loan program. All borrowers may consolidate their loans 6 months after graduating or leaving school, regardless of the date.
Pell Grants
The maximum Pell grant award for the 2010-2011 school year will be $5,550, and increases in the maximum award will be indexed to the cost of inflation beginning in 2013. By 2017, it is expected that the maximum grant will reach $5,975.
Income Based Repayment & Public Service Loan Forgiveness
For current students, anyone with a Federal student loan, and new borrowers between now and June 30, 2014:
The Income Based Repayment option caps student loan payments at 15% of discretionary income (adjusted gross income less 150% of the poverty level based on family size) and remaining balances will be forgiven after 25 years of repayment. (More information on IBR from the U.S. Department of Education.)For NEW borrowers after July 1, 2014 (students who have never taken out a loan before- even if they are going back to college after a time away):
Additionally, those serving in public service or non-profit employment are eligible to have remaining balances forgiven after 10 years of employment in an eligible occupation and repayment. (More information on the Public Service Loan Forgiveness Program from the U.S. Department of Education.)
The Income Based Repayment option will cap student loan payments at 10% of your discretionary income and remaining balances will be forgiven after 20 years of repayment.
She wrote:
The federal Pell Grant program will get a badly needed financial boost. The Obama administration says the new law pumps more than $40 billion into this program, which provides need-based grants to low-income undergraduates and certain graduate students.
Starting in 2013, the award will be scaled to the consumer price index, adding on a cost-of-living increase. That will raise the maximum from $5,550 to $5,975, according to CBO estimates.
Here's what really excites me. There will be additional funds for community colleges, historically black colleges and other institutions that serve minorities.
Community colleges are expected to get $2 billion over four years. Minority and historically black colleges and universities will get $2.55 billion.
It's about time community colleges got some attention and needed funds. Maybe now, these institutions will shed the reputation that they exist for the academically challenged. Maybe now they won't be seen as the "13th grade," as some people say in discouraging students from this road to higher education.
...
At least if you're stuck with the debt, provisions in the health-care law will lower the cap on monthly payments for some.
Beginning in 2014, student-loan payments under the income-based repayment plan will be capped at no more than 10 percent of a borrower's discretionary income -- the amount of a person's adjusted gross income that exceeds 150 percent of the poverty line for the family size. Payments are capped at 15 percent.
If people keep up their payments, any borrowed amount not paid after 20 years will be forgiven (down from the current 25 years). For public service workers -- teachers, nurses and those in military service -- the debt is forgiven after 10 years.
In many respects, it was quite appropriate to fold higher education provisions into the health-care reform legislation. The financial health of a lot of people has been hurt by the amount of debt they use to get an education.
The Denver Post reports:
President Barack Obama signed into law the last piece of his mammoth plan to overhaul health care Tuesday and, with the same pen strokes, achieved a far-reaching change in the way most Americas help pay the cost of a college education.The San Francisco Chronicle summarizes how students and taxpayers benefit from these new student loan reforms.
Both the health care provisions and revamping the loan program for college students were sandwiched into a single piece of legislation — the budget-reconciliation bill approved last week by the House and Senate.
President Obama signed important and welcome changes to the nation's campus loan program. The reforms should save the country billions and give more students a crack at a college degree.Which is what made the signing ceremony all that more enjoyable. The Washington Post reported on the "ebullient mood" of the signing ceremony:
Why it took so long is a minor scandal. Since the 1970s, federal money was doled out to banks to lend to students. In practice, though, the banks collected a healthy fee and fobbed off the bad loans to the government. It was a no-lose deal for these lenders.
But it endured, largely through fierce lobbying from lenders such as Sallie Mae. This year, the dam broke. The Senate and House voted to put Washington in charge of the loans, a shift estimated to save $68 billion over 10 years. That will allow loan limits to rise slightly, expand Pell Grants to defray tuition bills for needy students and invest $2 billion in community colleges.
But the changes didn't come easily, despite the sustained and gallant efforts of Rep. George Miller, D-Martinez.
Pelosi vigorously clapped back at the crowd as camera flashes popped. When Obama later singled Pelosi out, calling her "amazing," the crowd jumped to its feet again. (Rep. George Miller (D-Calif.) got a standing ovation, too).Learn more about the reforms to federal student loans as well as the fixes to the health care reform legislation.
While lenders used scare tactics about job loss to try to protect their billion dollar subsidies, EPI found that the legislation will result in more help for student and more jobs:
According to the Congressional Budget Office, the legislation will reduce bank subsidies by $61 billion between 2010 and 2019. A large share of these savings will then be used to boost financial aid for low- and middle-income borrowers.(emphasis and link added)
For example, the legislation increases funding for Pell Grants by $36 billion over the next 10 years. Pell Grants are scholarships to help low- and moderate-income students pay their college costs. Sixty-two percent of dependent Pell Grant recipients come from families with incomes below $30,000 per year. Pell Grants are therefore extremely well-targeted to individuals who will rely on them to increase their spending (for textbooks, tuition, and other expenses) rather than to increase their savings.
Similar to food stamps and unemployment insurance, this spending creates demand for goods and services in local communities, and this in turn helps to create jobs. The key reason for persistently high unemployment in the United States is the lack of demand for goods and services; spending that spurs demand thus creates jobs.
The job-creating effects of the education provisions of the reconciliation legislation will likely outweigh any job loss that could result from eliminating the middlemen in the student loan programs. These reforms are clearly a win-win-win for American workers, students, and taxpayers.
The legislation makes health care even more affordable for the middle class, lowers prescription drug costs for seniors by closing the “donut hole” over time, reduces the deficit and strips out special deals that favored one state over another. The bill also makes the most sweeping changes to our federal student loan program in a generation.
This morning, the Speaker of the House enrolled the bill. The package will now go to President Obama’s desk for his signature. Below are some photos of the enrollment ceremony as well as a few of a surprise birthday cake for Speaker Pelosi on her birthday.
The legislation makes health care even more affordable for the middle class, lowers prescription drug costs for seniors by closing the “donut hole” over time, reduces the deficit and strips out special deals that favored one state over another. The bill also makes the most sweeping changes to our federal student loan program in a generation.
They found:
Nearly two-thirds of Americans say they favor a proposal to increase the amount of money available for college loans by allowing the government to provide those loans directly to students, according to a new poll.Read more about their poll and learn more about the Student Aid and Fiscal Responsibility Act.
A CNN/Opinion Research Corporation survey released Wednesday indicates that 64 percent of respondents favor the proposal and 34 percent opposed it.
...
The survey also indicates, to a degree, some rare bipartisan support, with a vast majority of Democrats, a solid majority of Independents, and a slight majority of Republicans favoring the proposal.
The Washington Post reports:
College students swarmed Capitol Hill on Tuesday to plead for more financial aid as private lenders made a last push to preserve their endangered role in making federal student loans.Learn more about the Student Aid and Fiscal Responsibility Act, read Chairman Miller's condemnation of Sallie Mae's scare tactics and his comments after the House passed the bill on Sunday.
The dueling messages sought to influence potential Senate action this week on a proposal to expand direct government lending by cutting funding for private firms that make federally guaranteed loans. Tens of billions of dollars in projected savings would flow to grants for needy students.
...
The measure would save an estimated $61 billion over 10 years by cutting out subsidies for private lenders, which the Obama administration describes as needless go-betweens, and by expanding direct government lending. It would provide $36 billion in Pell grants for students from low- and moderate-income families, including $13.5 billion to plug a shortfall this year because rising numbers of students are eligible for aid.
The United States Student Association rallied hundreds of members on Capitol Hill for the bill. They waved signs -- "Students NOT Banks!" and "$ Now!" -- and chanted slogans that underscored the fiscal straits universities face as they raise tuition. "They say, 'Cut back!' " students yelled. "We say, 'Fight back!' "
"I'm an independent student," said Sabrina Ford, 19, of Ypsilanti, Mich., a financial aid recipient in her first year at Eastern Michigan University. "If the Pell grants are cut, I have no idea how I would pay for education. Right now, I rely on myself and the government to assist me."
The New York Times says:
Lots of Democrats can point to lots of different moments when they think the health care bill was brought back from the brink of collapse.Learn more about the Student Aid and Fiscal Responsibility Act.
But for a number of senior House Democrats, the crucial turning point was a meeting the night of March 9 in the offices of Speaker Nancy Pelosi. It was supposed to be a strategy session with Senate Democratic leaders about the budget reconciliation procedure that Democrats were planning to use to make final changes to the health care bill and push them through the Senate on a simple majority vote.
Instead, the session focused entirely on the question of whether to include another of President Obama’s top legislative priorities — a sweeping overhaul of federal student loan programs — in the reconciliation package.
The budget resolution approved by Congress last spring provided for completing both major health care legislation and major education legislation through reconciliation, which adjusts federal policy to meet specific goals for reducing the deficit.
A trio of House leaders — Representatives James E. Clyburn, the Democratic whip; George Miller, the chairman of the Education and Labor Committee; and Xavier Becerra of California, the vice chairman of the Democratic caucus — argued strenuously in favor of including the education proposal.
...Although overshadowed by the larger health care fight, the inclusion of the education bill may have been a decisive factor, especially at a time when House Democrats were exceedingly distrustful of their Senate colleagues and were essentially being forced against their better judgment to approve the Senate’s health care bill as the base law to which they would later make changes.
The student loan overhaul was very popular in the House. And because it would save tens of billions of taxpayer dollars by ending subsidies to private commercial banks, it offered a purely populist message at a time when public anger at Wall Street is running high and many liberals were disappointed that the health care bill would not include a public option, or government-run insurance plan.
Mr. Clyburn, who as the whip is the party’s main vote-counter, argued forcefully that the student loan measure would help generate support for the health care package.
...
For some Democrats, the student loan plan is the hidden triumph in the health care fight, and the late-night meeting earlier this month was the crucial moment. “It was an fascinating conversation about what the Democratic Party represented,” one Democrat said.
“Members of Congress have a clear choice,” Mr. Miller said in a floor speech on Sunday night. We can side with the American people by making health insurance and college more affordable and accessible, while creating millions of jobs and reducing the deficit. Or we can side with the insurance companies and the banks. That’s it. That’s the choice. I’m siding with the American people.”
The health insurance reform package combines the best ideas from all sides of the debate, capping a year-long transparent legislative effort. It delivers on President Obama’s key goals for health reform of slowing the growth of health costs, creating competition in the health insurance marketplace, and keeping insurers honest. It will protect people’s choices of doctors and health plans, and guarantee that every American can access quality, stable, and affordable health insurance coverage. It will rein-in the worst insurance company abuses, such as discrimination based on pre-existing conditions, policy rescissions when patients are in the middle of treatment, or insurance rate hikes without justification. Many of these protections kick in immediately; see a complete list here.
“Today Congress voted to stop wasting billions of taxpayer dollars to subsidize big banks, and start investing that money directly in our students and families. With this one move, we will help students pay for college, prepare them for our global economy, keep jobs in America and reduce the deficit,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the legislation. “We are now just one step away from sending President Obama reforms that are good for students, good for taxpayers, and good for U.S. jobs.”
Below is a copy of U.S. Rep. George Miller’s (D-CA) remarks, as prepared for delivery, during floor debate on the health insurance and student loan reform legislation. Miller is the House author of both pieces of reform.
Madame Speaker, I rise in support of this truly historic legislation that addresses two of America’s greatest troubles – the crushing costs and high obstacles of obtaining both quality health care and a college education.
Our nation and its economy have suffered from our longstanding failure to make health care and college accessible and affordable to all of the American people.
Americans have waited a long time for health insurance reform – nearly 100 years.
Today, Congress and President Obama will deliver on a central promise, on a dream deferred, on a crucial demand.
Newsweek says:
Because of the recession and continued high jobless rates, a surge of prospective students are heading to college to gain a competitive advantage in the job market, and an unexpectedly large number of them are applying and qualifying for Pell grant money to help pay for their classes. The U.S. Department of Education says 2.6 million more people have already applied and qualified for Pell grants for fall 2010, compared with academic years before the recession began. Specifically, between fiscal year 2008 and fiscal year 2011, the number of qualified applicants has risen from 6.1 million to 8.7 million.Learn more how the Student Aid and Fiscal Responsibility Act will affect your congressional district.
During a conference call with reporters late Thursday, Education Secretary Arne Duncan stressed that if the direct-student-loan bill fails to pass, there will be no way to span the gap between the money already allocated for Pell grants this fall and the increased demand for financing. The result would be that many qualified applicants would not get the maximum of $5,150 but a whittled-down check averaging $2,150.
The savings from the bill, Duncan said, could help the country “educate our way to a better economy. The downside, if we do nothing, is that as many as 8 million students will see their aid cut by as much as 50 percent. This is a huge, huge opportunity.”
See how SAFRA will benefit students living in each congressional district:
Alabama
- Jo Bonner (AL-1)
- Bobby Bright (AL-2)
- Mike Rogers (AL-3)
- Robert B. Aderholt (AL-4)
- Parker Griffith (AL-5)
- Spencer Bachus (AL-6)
- Artur Davis (AL-7)
Arizona
- Ann Kirkpatrick (AZ-1)
- Trent Franks (AZ-2)
- John B. Shadegg (AZ-3)
- Ed Pastor (AZ-4)
- Harry E. Mitchell (AZ-5)
- Jeff Flake (AZ-6)
- Raúl M. Grijalva (AZ-7)
- Gabrielle Giffords (AZ-8)
- Mike Thompson (CA-1)
- Wally Herger (CA-2)
- Daniel E. Lungren (CA-3)
- Tom McClintock (CA-4)
- Doris O. Matsui (CA-5)
- Lynn C. Woolsey (CA-6)
- George Miller (CA-7)
- Nancy Pelosi (CA-8)
- Barbara Lee (CA-9)
- John Garamendi (CA-10)
- Jerry McNerney (CA-11)
- Jackie Speier (CA-12)
- Fortney Pete Stark (CA-13)
- Anna G. Eshoo (CA-14)
- Michael M. Honda (CA-15)
- Zoe Lofgren (CA-16)
- Sam Farr (CA-17)
- Dennis A. Cardoza (CA-18)
- George Radanovich (CA-19)
- Jim Costa (CA-20)
- Devin Nunes (CA-21)
- Kevin McCarthy (CA-22)
- Lois Capps (CA-23)
- Elton Gallegly (CA-24)
- Howard P. "Buck'' McKeon (CA-25)
- David Dreier (CA-26)
- Brad Sherman (CA-27)
- Howard L. Berman (CA-28)
- Adam B. Schiff (CA-29)
- Henry A. Waxman (CA-30)
- Xavier Becerra (CA-31)
- Judy Chu (CA-32)
- Diane E. Watson (CA-33)
- Lucille Roybal-Allard (CA-34)
- Maxine Waters (CA-35)
- Jane Harman (CA-36)
- Laura Richardson (CA-37)
- Grace F. Napolitano (CA-38)
- Linda T. Sánchez (CA-39)
- Edward R. Royce (CA-40)
- Jerry Lewis (CA-41)
- Gary G. Miller (CA-42)
- Joe Baca (CA-43)
- Ken Calvert (CA-44)
- Mary Bono Mack (CA-45)
- Dana Rohrabacher (CA-46)
- Loretta Sanchez (CA-47)
- John Campbell (CA-48)
- Darrell E. Issa (CA-49)
- Brian P. Bilbray (CA-50)
- Bob Filner (CA-51)
- Duncan Hunter (CA-52)
- Susan A. Davis (CA-53)
Over the past year of public debate, we’ve heard a lot about what banks think of these reforms. But what about students? They can’t afford powerful PR firms and lobbyists – but there’s a reason students across the country are calling for Congress to pass the bill.
In the Richmond Times-Dispatch, Chairman Miller said:
If Congress makes the right call this week, students and taxpayers will win out.In the San Francisco Chronicle, Rep. Miller wrote:
In the coming days, the House and Senate will take a critical up or down vote on historic health insurance reforms. Tied to them will be the most significant reform of our federal student loan program in a generation. It will make federal aid more effective and cost-efficient for students, families, and taxpayers, without increasing the deficit.
Congress should support both measures.
Our bill is good for taxpayers. It would eliminate these needless subsidies and instead have the government initiate student loans, as it does today, and private banks service them. Consider that the government now funds 88 percent of all federal student loan volume. There's simply no reason to keep giving banks a handout.
Our bill is good for students. The federal government has already proved to be a more reliable lender for students in the midst of economic instability. All of the savings generated from switching to direct lending will go to help students pay for college and reduce our deficit.
Our bill is good for jobs. It would preserve private-sector jobs by allowing banks to compete for loan servicing contracts - and could even bring overseas jobs back home. Unlike loans made by banks, direct government loans must be serviced by U.S. workers.
Students overwhelmingly support the proposal. During the 2009 National Student Congress, student aid reform was unanimously passed as a top legislative priority for the United States Student Association, which represents over 4.5 million college students. Hundreds of student governments have subsequently adopted resolutions supporting the Student Aid and Fiscal Responsibility Act, and hundreds of thousands of students have contributed to a national “wall of student debt” with paper “bricks” exhibiting their personal and financial struggles to pay for college.Those who are using the lending services to finance their education see the wisdom investing in the next generation rather than subsidizing banks.
We encourage you to read Cendana's entire op-ed as well as learn more about the Student Aid and Fiscal Responsibility Act as well as other groups that support the legislation.
They fact checked two myths opponents are peddling and made a strong case for passage of SAFRA:
First, it's no government takeover. Opponents would make it appear as though Democrats want bureaucrats to destroy a functioning private market for federally backed student loans. In fact, the only reason any private company is in the business of originating such loans is because of government support, and propping up that artificial market is expensive. In the end, it's a better deal for taxpayers to have the government lend money directly to students. Private lenders, who want to preserve some role for themselves in the loan origination business, counter that they provide better services to students. But the government plans to farm out loan servicing to them through a process of competitive contracting.Learn more about the Student Aid and Fiscal Responsibility Act.
Second, reconciliation, which removes the filibuster as an option and allows legislation to pass with a simple majority, has been on the record as an option for student loan reform for months. Since there can be only one reconciliation bill per budget year, the Democrats' move to add the education measure to health-care reconciliation should be no surprise. If there is a proposal tailor-made for reconciliation -- a procedure originally intended to help Congress rationalize the budget -- it is this plan to end a wasteful program of subsidies for private lenders.
There will also be three hearings this week on the Protecting America's Workers Act, the administration's ESEA reauthorization blueprint, and addressing the needs of diverse students.
As the New York Times reports:
Democratic Congressional leaders struck a tentative agreement on Thursday that breathes new life into President Obama’s proposed overhaul of federal student loan programs.Politico is reporting that the loan bill could give Obama twin win. And it is a win for students, families, and taxpayers too. Chairman Miller said, "Supporting students and their families rather than banks is a win-win for our country, is a much better use of taxpayer dollars, and is helpful to passing the overall health reform bill. Sen. Harkin and I and many of our colleagues have been making the case that joining these two bills presents a remarkable opportunity for our country.”
The deal would bundle the bill into an expedited budget package along with the Democratic health care legislation, which would allow for both measures to be passed by the Senate on a simple majority vote. Without the deal, the student loan bill would have been unlikely to pass because it lacked the 60 votes needed to overcome a filibuster.
The bill would end government payments to private, commercial student lenders, leaving the government to lend directly to students. It would also redirect billions of dollars to expand the Pell grant program for low-income students, and to pay for other education initiatives.
The bill isn't finalized and faces some possible roadblocks as the LA Times and Chronicle of Higher Education report, but Chairman Miller and House Democrats are a lot more confident that the budget reconciliation will include student loan and health bills.
Miller was joined by U.S. Senator Tom Harkin (D-IA), the chair of the Senate education committee, House Majority Whip James E. Clyburn (D-SC) and Democratic Caucus Vice Chairman Xavier Becerra (D-CA), who underscored the importance of the bill for the Congressional Black Caucus and the Congressional Hispanic Caucus, because it invests billions of dollars to help low-income and minority students pay for college and graduate.
“Senators have a clear choice here: they can either continue to send tens of billions of dollars in wasteful subsidies to banks – or they can start to invest that money directly in students,” said Miller, who is the author of the student aid bill in the House. “This choice speaks to what our priorities will be for the next generation. We have a once-in-a-lifetime opportunity to change Washington and do the right thing, the fair thing, and the fiscally responsible thing for hard-working families. This is very important to the members of the House Democratic Caucus.”
Created with flickrSLiDR.
The Wonk Room notes:
The op-ed has plenty of scaremongering about Washington takeovers and long lines for student loans, but it doesn’t acknowledge the simple fact that the government already makes millions of loans every year, in a process that does not look anything like waiting in line at the DMV. In fact, under SAFRA, student loan companies will still service and administer the loans, they just won’t take federal money and originate them. That money, instead of going to the compensation, advertising, and overhead of private companies, will be reinvested in Pell Grants and other education initiatives.And Kevin Carey at the Quick and the Ed goes so far as to say Senator Lamar Alexander is Making Things Up regarding this bill.
Learn more about the Student Aid and Fiscal Responsibility Act and as well as some of the facts surrounding other myths about this bill.In reality, getting a student loan through the Federal Direct Loan Program isn’t going be any different than it is for the millions of students who are already getting loans through the Federal Direct Loan Program, which involves filling out the same forms you use to get loans under the “give-banks-billions-of-free-taxpayer-dollars” program that Alexander is defending.
Alexander also alleges that the administration has been less than forthcoming about what’s really going on here:
Here is what they haven’t told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you’ll work longer to pay off your student loan to help pay for someone else’s education — and to help your U.S. representative’s reelection.
It’s not a secret that the government will be lending money for more than that money costs. All lending programs work this way. The difference is that currently the money left over after paying people to administer the program is used to line the pockets of bank shareholders and executives whereas under Obama’s plan it will be used for Pell grants that benefit low-income students. Alexander’s contention that “you’ll work longer to pay off your student loan to help pay for someone else’s education” ignores the fact that many borrowers also receive Pell grants. Or attend the colleges that will receive grants to improve graduation rates, or have small children who will benefit from new investments in early childhood education. Alexander concedes that most people think such programs are a good idea. Otherwise, they wouldn’t help U.S. representatives get re-elected! He suggests that instead of subsidizing Pell grants, the federal government should use its unique ability to borrow cheaply to lend at extremely low rates, thus undercutting the private market for loans from companies that can’t raise money by issuing Treasury bonds. This, of course, would immediately be denounced as “socialism.”
“Industry Lobbying Imperils Obama Overhaul of Student Loans” (front page, Feb. 5) didn’t tell the whole story. In truth, lenders are fighting to save a system that allows them to reap billions in profits at the expense of students.Learn more about why the original NY Times article was inadequate, as well as the Student Aid and Fiscal Responsibility Act.
President Obama’s proposal would save taxpayers $87 billion — and redirect those funds to students instead of banks. It would make college more affordable without costing taxpayers a dime.
Lenders’ claims about job losses have proved overblown. This legislation would allow lenders to continue servicing all federal loans — ensuring high-quality customer services for borrowers and preserving jobs.
Lenders would compete for these contracts based on the quality of service they offer, including default prevention. In fact, two of the five performance criteria for current direct loan servicers — including Sallie Mae — are tied to default prevention.
It’s not news that lenders don’t like this bill, but college students overwhelmingly do. We can’t let their voices, or the points above, get drowned out by well-heeled lobbyists.
George Miller Washington, Feb. 8, 2010
The writer, a California Democrat, is the chairman of the House Education and Labor Committee and the author of the Student Aid and Fiscal Responsibility Act.
Inside Higher Ed has an article today on the report by the State Higher Education Executive Officers. The report looks at funding levels for universities. It says:
In the 2009 fiscal year, state support for higher education fell by $2.8 billion to $77.9 billion, but an infusion of $2.4 billion in federal funds largely offset those losses.
...
Just as states were seeing revenues decline, the enrollment boom hit a record high of 10.8 million students at public institutions – an uptick of 3.4 percent between 2008 and 2009. In a predictable pattern for a recession, those students have been carrying a greater share of the cost of their education. Indeed, 37.3 percent of education revenue came from tuition in 2009 -- an increase of 2.6 percentage points in five years, the report notes.
Thanks to the backstop in federal funds, universities all over America were able to keep teaching, even with a higher enrollment.
Learn how the American Recovery and Reinvestment helped backstop education funding gaps at local and state levels allowing teachers to stay in the classrooms and students to learn.
Although today's hearing with the Secretary of Education, Arne Duncan, had to be postponed due to a blizzard in the Washington, DC area, that hasn't stopped him from making a persuasive case for passing the Student Aid and Fiscal Responsibility Act.
In the Washington Post:
Education Secretary Arne Duncan on Tuesday urged the Senate to overhaul student lending, asserting that the banking industry has had "a free ride from taxpayers for too long" and that executives with lending giant Sallie Mae have enriched themselves as borrowers rack up college debt.
"Working Americans pay while bankers get rich," Duncan said in a prepared statement. "Sallie Mae executives have paid themselves hundreds of millions of dollars in the last decade while teachers, nurses, and scientists -- the backbone of the new economy -- face crushing debt because of runaway college tuition costs."
In an interview with Huffington Post:
Duncan called the administration's plans to overhaul the student loan program by ending government subsidies for private lenders "a once-in a generation, maybe once-in-a lifetime" opportunity that Congress would be foolish to let slip away.
and in that same article, Chairman Miller said:
"I haven't found one [argument from Sallie Mae's lobbyists] that made sense yet," said Rep. George Miller (D-Calif.), chair of the House Education Committee. "We are now providing 88 percent of all the capital and over the next ten years we can save 85 billion dollars doing it a different way. And that money can be used to enhance the educational opportunities of millions of students in this country. It is a no brainer."
The Student Aid and Fiscal Responsibility Act (H.R. 3221) passed the House with a bipartisan vote of 253 to 171 on September 17, 2009 and is waiting in the Senate.
The editorial board noted:
The House version phases out the wasteful part of the federal college lending program that pays private lenders a rich subsidy to make risk-free loans that are guaranteed by the government. The bill also expands another, more reliable and less expensive federal loan program that permits students to borrow directly from the government through their colleges.We encourage you to read the entire editorial and to learn more about the Student Aid and Fiscal Responsibility Act.
The arguments for moving in this direction are irrefutable. The subsidized program, for example, was supposed to keep loans flowing during recessions. But the loans dried up in the last credit crunch, forcing the government to rescue the program. The direct program, by contrast, suffered no such disruption. In addition to being more reliable, the direct program costs less. The Congressional Budget Office estimated last year that the country could save about $80 billion over the next decade by ending the private system and moving to the direct one.
Outmaneuvered on the merits, the lending industry has resorted to scare tactics and distortions. The claim that the direct system would amount to a government takeover of the system is absurd.
- SAFRA will not lead to significant job losses. While this legislation will trim the profits of CEOs and big banks, it will not lead to significant job losses. By maintaining a servicing role for both large and smaller lenders, this bill will preserve jobs and, unlike in the FFELP program, keep them from being shipped overseas.
- The current lending system is broken. The Federal Family Education Loan
Program (FFELP) now depends on taxpayer dollars not just for subsidies
that reimburse lenders when borrowers default on loans, but also for
the capital to finance their lending activity altogether. Taxpayers now fund 6 of every 10 dollars in federal student lending activity. They absorb all the risk. There’s simply no reason to keep pumping
taxpayer dollars into a broken system when the federal government can
provide the same low-cost federal loans more reliably for students and
at a lower cost for taxpayers. Under this bill, this federal program
will continue to be a federal program, as it always has been, and
private industry will continue to have a role, but one that is more
effective and cost-efficient for families and taxpayers.
- There would actually be fewer student loan defaults under SAFRA. Recent preliminary data released by the U.S. Department of Education shows that in 2007, default rates were lower in the Direct Loan program than in FFELP. By allowing private lenders to service these loans through a competitive process, which will include default prevention strategies, this bill will ensure that more borrowers can receive service from lenders that have been effective in keeping default rates low.
- Sallie Mae's alternative saves less and puts more money in lenders' pockets, instead of helping students. Sallie Mae's modified student loan proposal would slash more than $8 billion off of student aid to give lenders a bonus. “You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students,” said Chairman Miller. “The House saw this proposal for what it was and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.”
- Students themselves are clamoring for SAFRA. Most recently, Baylor University's college newspaper The Lariat published a story supportive of SAFRA.
- Colleges are finding it easier than anticipated to switch to the Direct Loan program. A survey conducted by the National Association of Student Financial Aid Administrators shows that colleges that switched from the federally-guaranteed student loan program to the Direct Loan program in the past year generally found it much easier than they expected. In fact, 96% of student loan volume is ready for direct loans, already
Read the SAFRA "Myth vs. Fact" page for more information about how the Student Aid and Fiscal Responsibility Act will help students.
However, the New York Times article does get it right when it reports on the jaw-dropping amount of money the student lending industry is spending on lobbying to maintain the status quo:
Sallie Mae, a publicly traded company that is the nation’s biggest student lender with $22 billion in loans originated last year, led the field in spending $3.48 million in federal lobbying in 2009, an increase from $3.2 million in 2008, and other lenders spent millions of dollars more, according to an analysis prepared for The New York Times by the Center for Responsive Politics.
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“We anticipated this,” Arne Duncan, the education secretary, said of the lending industry’s lobbying efforts. “They’ve had a sweet deal. They’ve had this phenomenal deal that taxpayers have subsidized, and that’s a hard thing to give up.”
Private lenders get a cut of the federally backed loans that they originate and service, with little risk of their own.
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“If people want to lose $80 billion on the taxpayer’s dime for the very narrow interests of Sallie Mae, I guess they can decide that, but it makes no economic sense to me,” [Chairman George Miller] said. “They had a great ride for years.”
The President’s proposed budget includes a request for $49.7 billion in discretionary funding for the Department of Education, a $3.5 billion increase from last year’s request. It streamlines programs through consolidation and program elimination with an eye on program effectiveness. Specifically, the President’s budget will:
Toppo reports:
The proposal would rework the way the federal government judges public schools, scrapping a requirement that states increase the percentage of students meeting standards each year, though it allows states to set their own standards.And the Administration has put their money where their mouth is. In the budget, they requested nearly $3 billion dollars in increased resources to help schools meet this higher standards.
In its place, President Obama wants lawmakers to consider rewarding states that show progress toward internationally benchmarked, nationally developed standards.
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Obama and Arne Duncan, his Education secretary, have long said No Child Left Behind doesn't hold states to high enough standards. On a conference call Monday, Duncan told reporters the law "often does little to reward progress" of schools that help students achieve — and lets states set standards that are too low to allow U.S. children to get into college or compete internationally.
"In too many states, those standards are too low, and the existing law doesn't provide states with incentives to raise their standards," Duncan said. "In fact, quite the opposite is true."
About the budget request, Chairman Miller said:
Learn more about the Elementary and Secondary Act and the President's educational budget proposals.
I applaud the President’s continued funding commitment to early education and our K-12 schools. His budget sends the right message about balancing incentives with resources – spurring major school improvements and providing the resources needed to make them. I agree with his focus on rigorous standards, effective teachers and turning around our lowest performing schools. We will examine these and other key areas as we begin working on a bipartisan rewrite of our federal education laws.
The president’s fiscal year 2011 budget, slated to be released Monday, will seek a 6.2 percent increase to the U.S. Department of Education’s budget, including up to $4 billion more for K-12 education. The department’s discretionary budget for fiscal 2010 is roughly $63.7 billion.Chairman Miller said after the speech:
A large piece of the increase, $1.35 billion, would be aimed at extending beyond this year the $4 billion in economic-stimulus program Race to the Top grants and opening up the competition—now limited to states—to school districts. The president highlighted the Race to the Top saying it had “broken through the stalemate between left and right,” and pledged to expand the reform priorities of that competition—among them turning around failing schools and increasing the supply of effective teachers—to all 50 states.
“The idea here is simple,” he said. “Instead of rewarding failure, we only reward success. Instead of funding the status quo, we only invest in reform—reform that raises student achievement, inspires students to excel in math and science, and turns around failing schools that steal the future of too many young Americans, from rural communities to inner cities.”
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President Obama also called on Congress to pass legislation that would make sweeping changes to the student loan program and redirect money from the projected savings to building new school facilities and bolstering community colleges, early-childhood-education programs, and Pell Grants, which help low-income students pay for college.
“I am especially pleased that President Obama called on Congress to rewrite our nation’s federal education laws. The key to getting this done will be bipartisanship. I plan to begin working on this immediately with this administration, Congressman Kline, our colleagues on the House Education and Labor Committee and all parties that have ideas about how to improve our schools.We encourage you to read the entire Education Week article. Click on the links to learn more about the Elementary and Secondary Education Act, Race to the Top, and the Student Aid and Fiscal Responsibility Act.
“Throughout his speech, President Obama talked about changing the way Washington works. One way we can do just that is by enacting legislation already passed by the House that would invest billions of dollars to help families pay for college – at no cost to taxpayers – by eliminating taxpayer subsidies for student loan middle men. Ending these subsidies will save $87 billion that we can invest directly in our college students and in improving early education and community colleges. It’s a much better use of taxpayer dollars.
Unprecedented growth in student loans over the past two years is raising questions about whether a generation will be saddled with debt before it has even entered the workforce, according to data that the Equifax Inc credit bureau provided exclusively to Reuters.With this increase in student loans, students should know their loans are reliable and not subject to the whims of a volatile market. The Student Aid and Fiscal Responsibility Act would do just that for federal loans.
The number of U.S. student loan accounts has risen 29 percent to 69 million over two years, according to Equifax, while balances have jumped by $105 billion to $527 billion.
"We've never seen this high student loan activity," said Dann Adams, president of Equifax's U.S. Information Systems.
The demand for student loans results from college graduates pursuing advanced degrees because of high unemployment. Also, parents' depleted savings mean more college-age children are forced to take on debt.
It would convert all new federal student lending to the stable, effective and cost-efficient Direct Loan program beginning July 1, 2010. All new federal student loans would be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.
Given the Reuters' report it is rather unsurprisingly that the Chronicle of Higher Education reported today that the cost of college is a big worry of freshmen according to a national survey. The Chronicle on Higher Education says:
Financial concerns, from paying for college to job prospects, dominated the new-student experience in 2009, according to an annual survey on freshman attitudes.The Student Aid and Fiscal Responsibility Act would invest the bill’s savings in making college affordable and helping more Americans graduate. It would invest $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2011, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent. It would also strengthen the Perkins Loan program, a campus-based program that provides low-cost federal loans to students, by providing the program with more reliable forms of credit from the federal government and expanding the program to include significantly more college campuses. Finally, it would keep interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012.
About two-thirds of freshmen said they were either somewhat or very worried about their ability to finance their college educations. Those citing "some" concerns about money increased about two percentage points, to 55.4 percent, while students citing "major" concerns remained at 11.3 percent, about the same as in 2008.
Specifically, the Higher Education Opportunity Act tries to streamline the FAFSA Application Process by encouraging a reduction in the number of questions on the FAFSA form over the next five years. It further simplifies the FAFSA re-application process so that an applicant can provide updated information in subsequent years, rather than re-filing a new FAFSA form and enables the U.S. Department of Education and the Internal Revenue Service to work together to use information the government already has from applicants’ federal tax forms, such as income and asset information.
Additionally, it allows students and families to enter information and receive estimates of their Expected Family Contribution as well as their estimated federal student aid packages in the years before they fill out the FAFSA.
To help low-income families, there is now a two-page “FAFSA-EZ” form for low-income students and families who qualify for the “auto-zero” family contribution.
But the Committee has pushed for even further simplification of the FAFSA in the Student Aid and Fiscal Responsibility Act (HR3221). This historic legislation was passed by the House in September and reduces the number of questions that a family must answer to determine a student’s financial aid eligibility.
When signed into law, the Student Aid and Fiscal Responsibility Act will remove asset questions. H.R. 3221 allows the Department to replace the six current asset questions with a single “yes/no” question that most applicants will be able to answer easily. In place of the asset questions, H.R. 3221 creates an asset cap for need-based aid above which a student is ineligible for Pell Grants and subsidized Stafford loans. The asset cap is set at $150,000 and is indexed for inflation.
SAFRA would eliminate several items that students and families are asked to add to their income, such as child support payments received, military and clergy living allowances, and untaxed disability support. The only items remaining that are not on the tax form are items that students and families are allowed to subtract from their incomes. These include: combat pay, child support payments made, and scholarship aid that had been included as income on the tax form.
Learn more about the Higher Education Opportunity Act of 2008, the Student Aid and Fiscal Responsibility Act or see the new simplified FAFSA.
He says:
Under the current FFEL program, banks make loans to students. While those students remain in school, the federal government pays the interest on their loans; otherwise the interest accrues. Once the borrowers leave school or graduate, the lending agency collects on the loans. But if the student defaults, my department pays back the loan—plus the interest owed. The FFEL program, in short, is a great deal for bankers but a terrible one for taxpayers.Secretary Duncan goes on to explain how the Department of Education would originate the loans, but private banks would service them. That is how roughly 80% of student loans are done today. He notes that those colleges who have already moved to the Direct Loan program report that it was quick and easy. With the $87 billion in savings, the reform would substantially increase scholarships in the Pell Grant program and other financial aid for low-income students. Additionally the reforms would start new programs to raise college graduation rates and strengthen our community colleges.
We encourage you to learn more about the Student Aid and Fiscal Responsibility Act and to read Secretary Duncan's editorial.
Getachew Kassa, a student government officer at the University of Oregon and a USSA board member, wrote about how his university and state would be positively impacted by SAFRA in this editorial.
Mr. Kassa wrote:
Here in Oregon, the Legislature has severely cut funding for higher education over the last decade, and the Oregon Opportunity Grant received a reduction of over $10 million. Mitigating economic shortfalls on the backs of students by shifting the cost of college away from the state and onto working families is a shallow solution to a deep financial problem. Instead, the government should be investing in students, ensuring that Oregon helps meet President Barack Obama's goal of having the United States produce more college graduates than any other country by 2020.Learn more about the Student Aid and Fiscal Responsibility Act and read what others are saying about this necessary reform.
The U.S. Congress is doing its part to meet this ambitious aim by passing the Student Aid and Fiscal Responsibility Act, a landmark bill that makes the greatest higher education investment in American history. This legislation, which was passed by the House of Representatives on Sept. 17, eliminates the Federal Family Education Loan Program, a wasteful government program that subsidizes private lenders to issue student loans. By cutting out banks as the unnecessary middle man, the federal government will save an estimated $87 billion over the next 10 years that will be allocated to student-friendly, need-based aid and essential access and retention programs at no new cost to taxpayers.
WASHINGTON, D.C. – Today the House passed the Consolidated Appropriations Act, which includes critical investments in education, worker training, job creation, and other priorities that will help the U.S. economy move toward recovery. U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, released the following statement:
This bill would take the middle man - banks and private lenders - out of federally guaranteed student loans. Right now, the U.S. Education Department makes some student loans directly, but the rest - worth millions of dollars each year - are made by private lenders, who then receive government subsidies for doing so. Eliminating those payments will save $87 billion over 10 years, according to the Congressional Budget Office, so the bill will pay for its other provisions.Investing savings into increasing Pell grants and Perkins loans is only one part of this reform. Learn more about additional investments in community colleges, early learning, energy efficient schools and deficit reduction in the Student Aid and Fiscal Responsibility Act.
More help then will be available to more students. Over the next 10 years, $40 billion would be invested in building up the government's Pell grants, need-based scholarships that do not have to be repaid, so the maximum award available could go up annually, to keep pace with rising college costs.
The bill also would allow an additional $6 billion for Perkins low-cost, low-interest loans, thus reducing the number of students who would have to take out private educational loans, which have higher interest rates.
CLAIM: “The pending bill, which has passed the House but is stalled in the Senate, would ban private lenders from making federally guaranteed loans after July 1, 2010.”
FACT: The financial crisis has already caused many lenders to leave the federal student loan programs, leaving many students in a bind. The Direct Loan program provides the same low-cost loans to students as FFELP, with the added benefit of complete reliability, even in an economic crisis. And the bill will foster competition among lenders by allowing private companies to compete for bids to service these loans – ensuring that contracts are awarded to lenders who offer the best customer service and innovations for borrowers. This is competition that will help students and build on the best of what private industry can offer to borrowers.
The Philadelphia Inquirer said:
The bill that was passed by the House in September would provide about $80 billion over 10 years for President Obama's education initiatives. About $40 billion would go to the federal Pell grants program, which provides scholarships for low- and moderate-income students.We encourage you to read the entire editorial, learn more about the Student Aid and Fiscal Responsibility Act and join the Facebook page.
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Community colleges would get as much as $12 billion to help prepare a more skilled workforce. At a time when many two-year colleges have seen their funding slashed, the additional funding would provide for job training and capital projects on campuses.
Nationally, community colleges enroll more than six million students. Many, including those in the Philadelphia region, have seen tremendous enrollment growth during the recession and also need additional funding.
Obama's education plan would also pour about $8 billion into early childhood programs, which in recent years have taken a backseat on the public-education agenda. America's historically black colleges and universities would also get $2.5 billion.
“You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students,” said Miller. “The House saw this proposal for what it was and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.”
As Committee Member, Dina Titus of Nevada, says, “A higher education is vital to the future success of our nation’s young adults, and in order to attract good jobs of tomorrow to Nevada, we must have an educated workforce that is prepared to get the job done. The actions the House has taken this year will go a long way toward lowering the cost of college and reducing the burden on our students and their families.”
So far this year, the House of Representatives has taken a number of steps to bring down the cost of a college education and reduce the amount of debt students and their families face. In September, the House passed the single largest investment in aid to help students and families pay for college. The Student Aid and Fiscal Responsibility Act reforms the federal student loan system, saving taxpayers $87 billion. Of that savings, $10 billion goes toward deficit reduction and $77 billion goes toward making college more affordable through investments in Pell Grants, college access and completion support programs, and community colleges.
On July 1, a number of new benefits took effect to make college more affordable. Interest rates on subsidized federal student loans decreased from 6 percent to 5.6 percent. This was the second of four annual cuts to this rate, and it will continue to drop until it reaches 3.4 percent in 2011. Under the Income-Based Repayment program, borrowers’ monthly loan payments can be capped at 15 percent of their discretionary income.
Finally, as part of the American Recovery and Reinvestment Act passed by Congress in February, the maximum Pell Grant Award was increased by $500 to $5,350 for 2009-2010 and to $5,550 for 2010-2011.
WASHINGTON, D.C. – U.S. Reps. George Miller (D-CA) and Rubén Hinojosa (D-TX) today joined U.S. Education Secretary Arne Duncan in urging college campuses to take prudent action to ensure that their students continue to have access to stable, low-cost federal college loans, regardless of what happens in the economy. Their letter to college presidents echoes a letter Duncan sent to institutions last month.
Colleges and universities have not slashed sticker prices in response to the economic downturn. On the contrary, tuition and fees rose 6.5 percent at public four-year colleges compared with the 2008-2009 school year and 4.4 percent at private, nonprofit, four-year institutions. Those were steeper rates of increase than in prior years, after adjusting for inflation. Over the past decade, annual increases have averaged 4.9 percent at public colleges and 2.6 percent at private colleges.It is clear that students and families are increasingly relying on Pell Grant scholarships and other forms of federal student aid to help pay for college. While college tuition prices continued to increase at rates consistent with years past, students had greater access to reliable low-cost federal loans and grant aid. The report also shows that private student loan borrowing decreased by 50 percent from one year earlier, in part due to the freezing of the credit markets.
As Chairman Miller said, “Although paying for college remains far too expensive a burden for families, especially in this economy, this report shows that our work to help make college more affordable is paying off.”
The House recently passed legislation that would make a landmark $40 billion investment to boost the Pell Grant over the next 10 years, to stabilize access to low-cost federal student loans, to strengthen Perkins loans, and do much more to make college more accessible at no cost to taxpayers. This report confirms that these types of investments, coupled with our ongoing efforts to reduce students’ dependence on costlier private loans, are needed to provide relief to families in a difficult economy.
“Although paying for college remains far too expensive a burden for families, especially in this economy, this report shows that our work to help make college more affordable is paying off,” said U.S. Rep. George Miller, the chairman of the House Education and Labor Committee. “The financial roller coaster of the last year revealed deep weaknesses in the private financing of student loans. The good news is, thanks to swift action by Congress to safeguard federal student loans, families still had access to college aid during the worst moments of this economic monsoon.
“This report also shows that, for the second year in a row, more students are relying on the Pell Grant scholarship than ever before. If we’re serious about reversing the trends that have made too many students a part of ‘generation debt’, we have to continue to restore the purchasing power of the Pell Grant. The House recently passed legislation that would make a landmark $40 billion investment to boost the Pell Grant over the next 10 years, to stabilize access to low-cost federal student loans, to strengthen Perkins loans, and do much more to make college more accessible at no cost to taxpayers. This report confirms that these types of investments, coupled with our ongoing efforts to reduce students’ dependence on costlier private loans, are needed to provide relief to families in a difficult economy.”
They said:
The historic legislation, championed by President Obama and approved by the U.S. House earlier this month, is a rare and welcome chance for Congress to actually streamline government instead of just talking about it. If approved by the Senate, the Student Loan and Fiscal Responsibility Act could save taxpayers $47 billion to $87 billion over the next 10 years by eliminating the middleman role private lenders play in federal education loans.
Families who now get their Stafford or parental PLUS loans through banks or credit unions or nonprofits such as Sallie Mae would instead borrow directly from the federal government, working through school financial aid offices just as they do now.
The Star-Tribune is another important voice in support of the Student Aid and Fiscal Responsibility Act. Be sure to read other editorials and articles that explain the benefits to students and taxpayers through federal student loan reform.
The editorial started:
It was a blessed relief last week, in the thick of such intractable issues as health care and Afghanistan, to see the House of Representatives pass a piece of legislation that was urgently needed, made perfect sense and — mirabile dictu — could save taxpayers billions of dollars.
Members approved a bill that would end subsidies to private lenders who currently finance college loans, putting the government directly in charge. This significant measure, a longtime goal of Democrats, would save taxpayers about $87 billion over the next decade, estimates the Congressional Budget Office.
Those savings would be used to boost student grants, improve early education and pre-school programs, support community colleges and modernize public schools.
The Houston Chronicle points out that this is something needed by students because enrollment in both four-year and community colleges is expanding.
Democrats had been working for years to pass legislation curbing subsidies to lenders. Now, with a Democrat-controlled House, and with banks pretty much in the doghouse, the measure passed the House roughly along party lines, 253–171, with only four Democrats voting against and six Republicans in favor.We suggest you learn more about the Student Aid and Fiscal Responsibility Act and read the entire editorial.
It is yet to be seen how the bill will fare in the Senate, but for now, it spells good news for students and taxpayers — especially in Texas, where, as reported by the Chronicle's Jeannie Kever, post-high school students have enrolled in record numbers for the current school year, in spite of concerns that the recession would dissuade many of them from entering college.
Community colleges told Kever that enrollment had “skyrocketed,” and preliminary data from four-year colleges show enrollment has increased in many of them too, assuaging fears that more students might opt for the cheaper community colleges.
Most telling is what happened when they went searching for collegiate opponents.
- The Maine Campus (University of Maine): "We applaud the representatives who passed what amounts to the largest higher education aid reform bill of our lives. We hope the Senate follows suit."
- The Daily Cardinal (Stanford University): "The bill will help students graduate with less debt while saving taxpayers money. Such action is wise and long overdue."
- The Lariat online (Baylor University): "Though the opposition may see this as just another area overtaken by the federal government that may lead to job loss through the industry or a burden on universities during the transition out of their respective federal lending programs, it is a risk and a burden well worth shouldering."
- Daily Pennsylvanian (University of Pennsylvania): "Private lenders have shown that they are more trouble than they are worth, and redirecting the savings into expanding grants to students is an excellent, efficient redistribution of resources. We hope the House passes this bill."
- Georgetown Voice (Georgetown University): "It is essential that the Senate passes this bill. As Hoyas who claim to strive for a diverse community, we must lend our support to initiatives like this, which are crucial to enabling people from every background to come here."
- The Daily Reveille (LSU): "It’s finally time for banks to get their hands out of private education...Banks should not be in the business of profiting off the loans of students seeking the critical skills needed to compete in a global economy. Higher education deserves better. Our nation’s undergraduates deserve every chance to succeed in America, and thus to make America succeed with them."
- Indiana Daily Student (University of Indiana): "This bill decreases government bureaucracy, increases efficiency, wastes fewer taxpayer dollars and stops payouts to financial institutions for doing absolutely nothing but shifting their losses onto taxpayers. What’s not to love?"
It is somewhat curious that if you Google "students who support FFELP" you will get the following message: No results found for "students who support FFELP".Learn why college and university papers from coast to coast support the Student Aid and Fiscal Responsibility Act.
“I want to thank Chairman Cohen and the House Judiciary Subcommittee on Commercial and Administrative Law for examining this critical issue that affects student loan borrowers past, present and future – many of whom are struggling more than ever to make ends meet. I also want to commend Rep. Danny Davis, a former member of my committee, who has been fighting for years to correct this injustice.
“Today, Americans who file for bankruptcy face significant obstacles in discharging private student loans, obstacles they do not face with respect to other type of consumer debt – credit card debt, car loans, and mortgage and utility bills. Due to provisions that were quietly slipped into a 2005 bankruptcy law, individuals who borrow college loans from private lenders find it almost impossible to wipe out those loans in bankruptcy – a change that gives special treatment to lenders and levies a devastating penalty on students.
The bill, which passed 253 to 171, would allocate about $80 billion over the next decade for new loans, community colleges, school construction and early childhood programs without increasing taxes or adding to the deficit. How? Instead of paying bankers to provide loans for which they bear no real risk, the government would make the loans directly.Mr. Dionne also remarks about how this talk over labels and "prefabricated boxes" is coloring the health care debate. We encourage you to read the entire article.
Liberals are always accused of spending money without worrying where it comes from, but in this case, costs are covered by making a government program more efficient -- yes, at the expense of bankers.
"We were paying these exorbitant subsidies to bankers who were taking government money, loaning it to somebody else, getting government guarantees that the loans would be paid back, and then taking all these profits," said Rep. George Miller (D-Calif.), the bill's champion. This, he told me, led Congress to ask itself: "Hey, chump, what is it you don't get about what's going on here?" The only knock on the proposal is ideological: that government is "taking over" the student loan program. But it's already a government program. The bill simply eliminates corporate welfare.
This is a classic case of how the Great Ideological Distortion Machine does its mischief: Instead of focusing on how the bill advances values typically regarded as "centrist" -- government efficiency, pay-as-you-go budgeting -- the banks' defenders bury the specifics behind abstract discussions of "big government." Yet I'd venture that middle-of-the-road Americans prefer that their tax money go toward education rather than to padding the profits of financial firms.
This afternoon, the House passed the Student Aid and Fiscal Responsibility Act (HR 3221) by a vote of 253-171. The bill ensures that higher education is more affordable at no additional expense to taxpayers – in fact, it saves money. More students will go to college, they will graduate with less debt, and the federal loan initiatives that they and their families depend upon will be strengthened for decades to come. The legislation will generate almost $100 billion in savings over the next 10 years that will be used to increase Pell Grant scholarships, keep interest rates on federal loans affordable, and safeguard federal student loan access for families.
Speaker Pelosi:
Education and Labor Committee Chairman George Miller (D-CA):
Chairman Miller:
“My colleague on the other side of the aisle said that this legislation is the wrong way and the wrong place to make this investment. He’s got it exactly backwards. This is the exact way to make this investment. To take the savings by cutting the subsidies to the lenders and recycling those on behalf of families and students and our community institutions so that we can expand the educational opportunities in this country. we cannot continue just to wring our hands about our competitive place in the world..we must do something about it.”
Rep. Ruben Hinojosa (D-TX):
Hinojosa:
“The legislation will increase affordability, accessibility and college completion rates particularly for first generation college low-income, minority and middle-class students. It invests $40 billion to increase the maximum annual Pell Grant scholarships to $5,550 by 2010 and 2019, $6,900 and provides low and middle income families with affordable, direct federal student loans and simplifies the application process for financial aid.”
Rep. Rob Andrews (D-NJ):
Andrews:
“The issues before the House tonight are these. Do you agree or disagree that the time has come to make college more affordable for men and women around this country by making Pell Grant scholarships more available, student loans less expensive and more available? I think most people would say, yes, we do agree with that.”
Rep. Judy Chu (D-CA) on the investments the Student Aid and Fiscal Responsibility Act makes to community colleges:
Chu:
“As a Professor for over 20 years, I know firsthand how important community colleges are to helping hard working Americans achieve their dreams. About one out of every two college students attends a community college and they are some of the hardest workers I have ever met. My students came from all walks of life - they were immigrants, single moms and laid-off workers and many of the students were the first in their families to go to college. Community colleges are the backbone of our nation’s workforce.”
Chairman Miller responds to criticism of the bill and Rep. Tim Bishop (D-NY) explains how this legislation reforms student loan practices for the benefit of both the taxpayer and the borrower:
Bishop:
“What we are doing is we are paying private lenders a subsidy so that they will have the privilege of lending federally originated money to their borrowers. We guarantee repayment of that money to the tune of 97% of the amount outstanding and the private lenders reap whatever interest payments are paid by the borrowers. This is a really, really good deal for private lenders. It is a deal that costs the American taxpayer approximately $8 billion to $9 billion a year that we don’t need to spend in that fashion. We can provide, We, the federal government, can provide the loan capital that students need.”
- Invests the bill’s savings in making college affordable and helping more Americans graduate
- Provides reliable, affordable, high-quality Federal student loans for all families
- Prepares students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete
- Promotes early learning standards reform to ensure the next generation of children enter kindergarten with the skills they need to succeed in school
- Meets Pay-As-You-Go fiscally responsible principles and reduces the deficit
The Student Aid and Fiscal Responsibility Act (H.R. 3221), which was approved by a bipartisan vote of 253 to 171, will move the U.S. closer to reaching President Obama’s goal of having the highest proportion of college graduates in the world by 2020.
It will generate almost $90 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, create a more reliable and effective financial aid system for families, and enact President Obama’s key education initiatives. The legislation represents the greatest investment in federal student aid in history, and is one of President Obama’s three top domestic policy priorities, along with energy and health care.
I rise today in support of H.R. 3221, the Student Aid and Fiscal Responsibility Act, a bill that will be transformative for our children, our economy, and our future.
Like President Obama’s other two pillars for economic growth – health reform and energy –this bill is about the future.
As he recently said: “In a world where countries that out-educate us today will out-compete us tomorrow, the future belongs to the nation that best educates its people.”
The legislation before us takes that challenge seriously.
Let us stop here and recall how the current loan system works:
1) Federal government provides private banks with capital.
2) Federal government pays private banks a subsidy to lend that capital to students.
3) Federal government guarantees said loans so the banks don’t have any risk.
And now, the proposed reform:
1) The federal government makes the loans.
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If it all works out, Congress will have come a way toward fixing this problem, at least when it comes to federally financed student loans. There’s already a new law that forgives part or all of the debt for graduates who go into careers in public service. Terms will be easier for low-income debtors.
The House will vote on the Student Aid and Fiscal Responsibility Act today. Stay tuned to our Twitter feed for updates on the debate and the vote.
The New York Times said:
Congress has a chance, starting this week, to end the boondoggle that allows private lenders to earn a handsome subsidy for making risk-free student loans that are guaranteed by the federal government. It’s a wonderful deal for the lenders — and an emphatically bad one for the taxpayers.The Washington Post said:
The House is expected to vote on Thursday on a bill that would simplify the loan system — and save the country nearly $90 billion over the next decade — by ending the subsidy program and allowing students to borrow directly from the government through their colleges and universities. To get this done, however, lawmakers will need to see through the spin and misrepresentations that have become all too common lately.
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Lawmakers need to put aside all the noise and pass this bill.
EXCEPT FOR a lucky few, paying for college isn't easy. Judging from how long it has taken, neither is reforming how the government provides the loans that make higher education affordable to millions. Yet Wednesday, as the House considers a bill that promises to save taxpayers billions of dollars, it's clear that the right choice is to vote yes.The Student Aid and Fiscal Responsibility Act will be considered on the House floor today and tomorrow. Stay tuned for updates.
Historically, the government has kept student-loan interest rates low through two programs: one in which the feds do the lending directly; and one in which the government subsidizes private entities that offer students loans at low, set interest rates. For more than a decade, private lenders fought back attempts to end the expensive subsidy system that kept them profitable at taxpayer expense. Then came the financial crisis, during which the public-private system fell apart, and the election of President Obama, who is intent on getting rid of the private middlemen.
According to the Congressional Budget Office (CBO), if the government directly financed all federally sponsored student loans, it would save $80 billion over 10 years. House Democrats have advanced a version of the president's plan that will probably get a vote in the House Thursday; the measure would put those savings into a range of worthy programs, from aid for community colleges to school renovation to larger Pell grants.
Below is a slideshow of his very busy day of action:
Created with flickrSLiDR.
Good afternoon. I’d like to thank U.S. Education Secretary Arne Duncan, Reps. Tom Petri, Tim Bishop, Ruben Hinojosa, and all our colleagues for joining us today.
I’d especially like to thank all the students for coming, and Jelisa Difon who will be sharing her story with us shortly.
We are here today under very exciting circumstances.
Over the next several days, the House will consider – and I believe will overwhelmingly pass – legislation that will be transformative for our students, families and taxpayers.
Pay heed to local hard-headed law enforcement professionals who deal with the worst that society has to offer on a daily basis.The Student Aid and Fiscal Responsibility Act will invest $1 billion each year in competitive grants to challenge states to build comprehensive, high quality early learning systems for children birth to age 5. It will also:
Speaking out in support of increased funding for early childhood education this week were Lincoln Police Chief Tom Casady, Lancaster County Attorney Gary Lacey and his chief deputy Joe Kelly.
"It's a concept that makes complete sense to all of us in this line of work," Kelly said. "The mission is validated by research."
Studies show a return of as much as $13 for every dollar invested in care and learning systems for disadvantaged children, according to Jen Hernandez of the Nebraska Children and Families Foundation.
The return comes in the form of savings in the cost of operating the criminal justice system, welfare, schools and other public systems. Research shows that participants in early childhood programs are as much as 29 percent more likely to graduate from high school and 40 percent less likely to repeat grades or be placed in special education.
- Build an effective, qualified, and well-compensated early childhood workforce by supporting more effective providers with degrees in early education and better compensation, and providing sustained, intensive, classroom-focused professional development to improve the knowledge and skills of early childhood providers
- Best practices in the classroom by implementing research-based early learning and development standards aligned with academic content standards for grades K-3.
- Promote parent and family involvement by developing outreach strategies to parents that will help them support their children’s development.
- Fund quality initiatives that improve instructional practices, programmatic practices, and classroom environments that promote school readiness.
- Quality standards reform that moves toward pre-service training requirements for early learning providers, and adoption of developmentally appropriate standards for teacher-child ratios and group size.
Private loans are often riskier because they have variable interest rates and cannot be discharged via bankruptcy. Nor are they eligible for payment deferments, loan forgiveness programs or income-based repayment options, like those that began on July 1, 2009.
Americans need affordable, quality education opportunities to help make our economy strong and competitive again. President Obama has identified an opportunity to make historic investments in our economic future by improving early education opportunities and making college dramatically more affordable – and all at no cost to taxpayers.
The Student Aid and Fiscal Responsibility Act would do just that:
- Invests $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2011, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent.
- Strengthens the Perkins Loan program, a campus-based program that provides low-cost federal loans to students, by providing the program with more reliable forms of credit from the federal government and expanding the program to include significantly more college campuses.
- Keeps interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012.
- Converts all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.
- Provides all federal student loan borrowers with upgraded, modern, state-of-the-art customer service. Rather than force private industry out of the system, the bill will forge a new public-private partnership that provides all borrowers with the highest-quality customer service when repaying their loans and maintains jobs. It will establish a competitive bidding process that allows the U.S. Department of Education to select lenders based on how well they serve borrowers, educate them financially, and prevent loan defaults. It will provide a role for non-profits to continue servicing student loans.
We encourage you to learn more about the Student Aid and Fiscal Responsibility Act, read CNN's article and The Project on Student Debt's report (PDF).
“My thoughts and prayers are with Senator Ted Kennedy, Rep. Patrick Kennedy, and the entire Kennedy family on this difficult day. Today, we mourn the loss of a leader who inspired and changed the lives of millions of Americans. When Eunice Kennedy Shriver founded the Special Olympics, she gave thousands of people with disabilities the opportunity to participate in sports when others thought it impossible. In recent years, Mrs. Shriver was instrumental in our efforts to ensure equal college opportunities for students with intellectual disabilities as part of a larger 2008 law that reformed our higher education programs for students and families. Mrs. Shriver dedicated her life to opening up new possibilities for every American living with a disability -- making enormous strides toward true equality for our country. We will honor her incredible spirit as we work to build on her legacy to ensure that Americans with disabilities have equal rights and opportunities to pursue their dreams.”
“The men and women who have made enormous sacrifices to serve our country deserve every opportunity to get a good education when they return home,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “This common-sense change will help them do just that. I applaud Secretary Shinseki, the Obama administration, and the state of California for taking action to ensure that veterans can receive the full amount of financial aid they are eligible for this coming year, regardless of what type of college they attend. Making sure that veterans who want to attend college in California can afford to do so is the right thing to do for our students, our university system, local economies throughout our state, and our competitive future.”
BACKGROUND
The new GI Bill authorizes the VA to pay the actual tuition and fees charged by a college for up to the maximum in-state tuition and fees charged by the most expensive public university in the state.
Students attending college in California would have been adversely affected by this calculation because the state’s public schools are barred from using the word “tuition” and instead must use the word “fees” when describing an institution’s cost. Therefore, a veteran who attends a private college in California would have received a much lower tuition benefit under the GI Bill than veterans at private schools in other states.
This new agreement will allow for the bulk of California’s “fees” to be characterized as “tuition” for the purposes of paying for the cost at private colleges – removing any unfair penalty that could reduce aid for veterans.
Two weeks ago, the House Education and Labor Committee, with the strong encouragement of the Obama administration, took a step toward ending the false premise that private lenders are full partners in the federally subsidized college loan program. If a bill approved by the committee becomes law, private lenders will be cut out of this program and will have to stop dining at their taxpayer-provided trough.Learn more about the benefits of the Student Aid and Fiscal Responsibility Act and read Mr. Cranford's complete column.
....
The lenders have held up the pretense that they provide better service than does an arm of the federal government and that there are actually differences among bank loans, so that students stand to benefit by picking one over the other.
Sorry, but that notion is a sham. Congress has long required that the terms of these loans be identical, regardless of whether they are issued by the government or a private lender. It doesn’t matter to the student where the money comes from — the dollar amounts, the interest rates and even the repayment terms are virtually the same.
For taxpayers, though, there is a difference, and it’s a big one. In the case of presumed “private” loans, the government pays more than it does for “direct” loans — billions of dollars more — because it guarantees the principal amount and it promises a minimal return to the lender. Banks are supposed to be compensated for taking risks, but in the case of government-subsidized student loans, they incur almost no risk. Yet they get compensated anyway.
Moreover, there’s ample evidence that some private lenders have engaged in questionable or worse behavior to persuade colleges to funnel student borrowers their way. When money is free, people will do all sorts of things to get their hands on it. And that raises questions about why lawmakers would want to perpetuate a system that promotes graft, as well as waste.
For the second time in two days, Republicans asked the Congressional Budget Office to manipulate an analysis of the Student Aid and Fiscal Responsibility Act (H.R. 3221), a bill that will invest almost $90 billion in additional student aid for families and pay down the deficit – and at no cost to taxpayers.
As Mr. Burd so elegantly points out:
If there is anything that we learned from the "pay for play" student loan scandal, it is how little choice borrowers in the FFEL program actually have. Don't forget that in 2007, the Education Department found that one lender made at least 80 percent of students' federal loans at 921 participating colleges. That same year, the research firm Student Marketmeasure reported that 1,412 FFEL schools had one loan provider that made 80 percent of their students' federal loans, with 531 of those colleges recommending only a single lender to their students. What kind of a choice is that?
and as Rep. Tim Bishop (D-NY), a former Provost of Southampton College where he worked for 29 years, said at the markup of the Student Aid and Fiscal Responsibility Act, "I never once encountered a student who was focused on choice. What they were focused on was 'Can I get the money?' and 'Can you guarantee me that I can get the money?'"
We encourage you to read Mr. Burd's complete post as well as learn more about the Student Aid and Fiscal Responsibility Act.
The analysis does not change the official score of the bill, the Student Aid and Fiscal Responsibility Act of 2009, which estimates that it will save $87 billion over 10 years, or the fact that it is fiscally responsible. All of those savings will be invested in additional aid to help student and families pay for college, to improve early learning opportunities for young children, and to pay down the deficit.
The federal college loan program that pays private lenders a generous subsidy to make loans that are guaranteed by the government is an enormous waste of money that has long served more to enrich lenders than to help students.That is why the Education and Labor Committee passed the Student Aid and Fiscal Responsibility Act with bipartisan support yesterday. As the New York Times editorial explains:
[It] would end the unnecessary private lending subsidies and plow the savings into important education programs. The bill, for example, devotes $40 billion to the all-important Pell grant program, which has allowed millions of poor and working-class students to attend college.Learn more about the Student Aid and Fiscal Responsibility Act and read the entire New York Times' editorial.
It would spend $8 billion on early-education programs and $10 billion on an initiative aimed at strengthening community colleges. It sets aside $4 billion for a school modernization and improvement program.
The consolidated program proposed in the bill would in no way expand government. The loans would be handled through colleges. They would be serviced and collected by private companies and nonprofits that are already lining up to get the work. By forcing the companies to compete, and to undergo periodic re-evaluations, Congress could get a good deal for taxpayers and better service for borrowers.
The legislation, the Student Aid and Fiscal Responsibility Act of 2009, will generate almost $100 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, create a more reliable and effective financial aid system for families, and enact President Obama’s key education priorities.
On Tuesday, July 21st, the House Education and Labor Committee will consider legislation that will make college dramatically more affordable by investing billions of dollars in additional student aid, at no cost to taxpayers. The Student Aid and Fiscal Responsibility Act of 2009 will generate almost $100 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, safeguard federal student loan access for families, and enact President Obama’s key education priorities. The legislation, which was introduced earlier today, pays for itself by making the federal student loan programs more reliable, effective and cost-efficient for students, families and taxpayers.
For more information on the legislation, click here.
H.R. 3221 - The Student Aid and Fiscal Responsibility Act of 2009 was reported favorably to the House with an amendment in the nature of a substitute, and that the Committee authorize the Chairman to transmit the bill, with an amendment in the nature of a substitute, to the Committee on Budget in compliance with Section 310 of the Congressional Budget Act of 1974 as the first part of this committee’s recommendations, pursuant to the reconciliation instruction in S. Con. Res. 13 by a vote of 30 to 17.
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WHAT:
Full Committee Mark-Up of H.R. 2187 “H.R. 3221, The Student Aid and Fiscal Responsibility Act of 2009”
WHEN:
Tuesday, July 21, 2009
11:00 a.m. ET
Please check the Committee schedule for potential updates »
WHERE:
House Education and Labor Committee Hearing Room
2175 Rayburn House Office Building
Washington, D.C.
This taxpayer money is urgently needed to provide aid to students for whom a four-year college is out of reach. Earlier this week, Obama proposed to infuse $12 billion into community colleges. Another block of savings will give extra funding for Pell Grants and link them with cost-of-living increases.We encourage you to read the entire editorial, as well as learn more about the Student Aid and Fiscal Responsibility Act of 2009.
In this economic climate, Congress must fix the broken system that unnecessarily takes money from taxpayers and students. Educational investments should go straight to students.
UPDATE: We also suggest you read the Washington Post article about Lifelines in the Student Loan Sea.
THE WHITE HOUSE
Office of the Press
Secretary
______________________________________________________________________________
FOR IMMEDIATE
RELEASE July
15, 2009
Statement from the
President on Chairman Miller’s education reform bill
I
applaud Chairman Miller for introducing an education reform bill that will cut
giveaways to special interests, invest in our children’s future, and save
taxpayer’s money.
Chairman
Miller and I are working to end the wasteful subsidies that are given to banks
and private lenders for student loans. Instead, his legislation will make
college more affordable by paying for annual increases in Pell Grants that keep
pace with inflation. He’s also working with us to simplify financial aid
forms and increase graduation rates.
This
legislation will also help us reach the goal I set out in
Finally,
I am proud that this legislation not only pays for itself, but also saves
taxpayers money and reduces the deficit. I look forward to working with
the Chairman and Congress to make this bill even stronger and pass it before
the end of the year.
The legislation, the Student Aid and Fiscal Responsibility Act of 2009, will generate almost $100 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, create a more reliable and effective financial aid system for families, and enact President Obama’s key education priorities.
Education Reconciliation: The Student Aid and Fiscal Responsibility Act
A Landmark Investment in America’s Economic Future
Now more than ever, Americans need affordable, quality education opportunities to help make our economy strong and competitive again. President Obama has identified an opportunity to make historic investments in our economic future by making college dramatically more affordable – at no cost to taxpayers. (See how SAFRA will benefit students living in each congressional district.)
The Student Aid and Fiscal Responsibility Act, which was included in the health care reconciliation bill that passed on March 21, 2010 by a vote of 220-211 and signed into law on March 30, 2010, embraces the president’s challenge. It will help us reach his goal of producing the most college graduates by 2020 by making the single largest investment in federal student aid ever. Specifically, these provisions will:
Create a more reliable, affordable, student-focused federal loan program by switching to all Direct Loans by 2010
- Converts all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.
- Provides students with low-cost federal college loans with the same interest rates, terms and conditions as loans made by lenders – and the peace of mind of knowing those loans will never disappear. Loans made through both the Direct Loan and the federally-guaranteed student loan programs carry an interest rate of 6.8 percent – a much more affordable interest rate than private loans carry. Under this legislation, federal student loan borrower will be able to borrow the same loans, at the same good rates as before – but these loans will be more cost-effective for taxpayers.
Ensure that all student borrowers can benefit from high-quality, state-of-the-art customer service when repaying their loans
- Upgrades the services all federal student loan borrowers receive. Rather than force private industry out of the system, the bill will forge a new public-private partnership that both maintains jobs and provides all borrowers with the highest-quality customer service when repaying their loans. It will establish a competitive bidding process that allows the U.S. Department of Education to select lenders based on how well they serve borrowers, provide financial literacy counseling, and prevent loan defaults. The legislation will also provide a role for non-profits to continue servicing student loans.
- Preserves servicing jobs in communities across the country. Between this new public-private partnership and the more than $500 billion in outstanding federally-guaranteed student loans that will still need to be serviced, there will be tremendous demand for workers to continue providing great service to Americans repaying their loans.
Streamline financial aid operations for colleges and universities
- College financial aid offices already have the infrastructure in place to administer Direct Loans. Schools will be able to operate these loans using the same on-site system currently used to administer Pell Grant scholarships; almost all schools participate in the program. Colleges and universities that have switched to Direct Loans, including those that converted in the midst of last year’s credit crisis, report that it was a fairly easy and inexpensive process. Currently about 1,700 schools participate in the Direct Loan program, including 500 colleges that switched in the past year alone. Under this bill about 4,500 colleges will need to switch to Direct Loans.
Just this week, President Obama set a new goal of graduating 5 million more Americans from community colleges by 2020. This legislation includes President Obama’s groundbreaking community college reforms that will help reach this goal and prepare students and workers for 21st century jobs by:
Creating a new Community College Challenge Grant Program that will transform community colleges into excellent education and job training centers
- Build a 21st century workforce by encouraging historic partnerships between community colleges, businesses, job training and adult education programs. The bill will create a new competitive grant program for community colleges to improved instruction, work with local employers, improve their student support services, and implement other innovative reforms that will lead to a college degree, certificate or industry-recognized credential to fulfill local workforce needs. The Secretary of Education will be able to evaluate the effectiveness of all programs and policies funded through these grants by using 2 percent of these funds to commission the Institute for Education Sciences to conduct a rigorous study to help the Secretary determine which reforms may be replicated at other colleges and states.
- Incentivize community colleges to achieve excellence by requiring them to meet benchmarks in order to participate in the challenge grant program. Under the program, the Secretaries of Education and Labor will award four-year grants to community colleges and other 2-year degree granting institutions on a competitive basis to support innovative pilot programs and policies. In order to continue to receive funding for year three of the grant period, community colleges must meet benchmarks they set in consultation with the Secretary of Education’s approval. Pilot programs and policies must also demonstrate that they can be replicated either in the state or nationwide. The minimum grant that can be awarded is $1 million. Funds can be used to carry at least two of the following activities:
- Facilitating transfer of credit articulation agreements;
- Expanding academic and training programs that provide relevant job-skill training for high-wage occupations in high-demand industries;
- Improving student support services including those identified under the Workforce Investment Act;
- Creating workforce programs that blend basic skills and occupational training leading to industry-recognized credentials;
- Building and enhancing linkages including dual enrollment programs and early college high schools as well as improving remedial and adult education programs; and
- Implementing reform programs to increase completion rates and provision of training for students to enter high-wage occupations in high-demand industries.
- Ensure that more students graduate with the expertise needed for high wage jobs and high-demand industries. Targets grants to high-need students and programs that focus on preparing students for jobs in fields that need workers and will continue to grow. The Secretaries would also be able to award six-year competitive grants to states to implement successful Challenge Grant Program reforms at other community and junior colleges within the state. Funding could be discontinued if the state does not make progress meeting benchmarks it develops with the Secretary by year three of the grant period.
Expanding access to education by supporting free, high-quality, online training, and high-school and college courses.
- The U.S. Department of Education would be authorized to make competitive grants available to eligible colleges, workforce programs or other entities to help support the development of these courses.
Ensuring that Americans can learn in modern, updated, and state-of-the-art community college facilities.
- Helps community colleges construct, renovate and repair their facilities by providing $2.5 billion, which will leverage additional funds, and ensures that funding is used for facilities that are primarily used for instruction, research, or student housing.
Nearly 12 million children under age 5 regularly spend time in child care arrangements and children with working mothers spend on average 36 hours per week in such settings. But currently federal and state policies for child care leave families with a patchwork system of child care with mediocre quality. Our children deserve and need better. By 4 years old, children from low-income families are already 18 months behind most other 4 year-olds. From the start, education reform should include high quality early learning opportunities from birth through age 5 to help give children what they will need to grow and succeed.
To ensure more kids reach kindergarten ready to succeed, the Student Aid and Fiscal Responsibility Act includes an Early Learning Challenge Fund to increase the number of low-income children in high quality early learning settings. Specifically, the legislation will:
Invest $1 billion each year in competitive grants to challenge states to build comprehensive, high quality early learning systems for children birth to age 5 that includes:
- Early learning standards reform.
- Evidence-based program quality standards.
- Enhanced program review and monitoring of program quality.
- Comprehensive professional development.
- Coordinated system for facilitating screenings for disability, health, and mental health needs.
- Improved support to parents.
- Process for assessing children’s school readiness.
- Improved data systems to improve child outcomes.
Transform early learning programs by insisting upon real change in state standards and practices:
- Build an effective, qualified, and well-compensated early childhood workforce by supporting more effective providers with degrees in early education and better compensation, and providing sustained, intensive, classroom-focused professional development to improve the knowledge and skills of early childhood providers
- Best practices in the classroom by implementing research-based early learning and development standards aligned with academic content standards for grades K-3.
- Promote parent and family involvement by developing outreach strategies to parents that will help them support their children’s development.
- Fund quality initiatives that improve instructional practices, programmatic practices, and classroom environments that promote school readiness.
- Quality standards reform that moves toward pre-service training requirements for early learning providers, and adoption of developmentally appropriate standards for teacher-child ratios and group size.
Modernizing school buildings will help revive our economy by creating jobs and preparing workers for the clean energy fields of the future. And by ensuring students can learn in modern, updated, renovated and safer environments, this legislation will help prepare future generations to compete in a 21st century global economy. Specifically, this legislation will:
Provide elementary and secondary schools and community colleges with access to funding for modernization, renovation and repair projects
- For K-12 schools:
- Authorizes more than $5 billion for elementary and secondary school facility projects over the next two fiscal years, and ensures that school districts will receive funds for school modernization, renovation, and repairs that create healthier, safer, and more energy-efficient teaching and learning climates.
- Allocates the same percentage of funds to school districts that they receive under Part A of Title I of the Elementary and Secondary Education Act, except that it guarantees each such district a minimum of $5,000.
- Provides grants to states to help community colleges finance new construction, modernization, renovation, and repair projects.
- Allows grant funds to be used to match private donations to a community college capital campaign.
For Community Colleges:
- Requires the majority of funds to be used for projects that meet green building standards. Allows states to reserve one percent of the elementary and secondary funding to administer the program, provide technical assistance, and to develop voluntary guidelines for high-performing school buildings.
- Increases transparency by requiring school districts to publicly report the types of modernization, renovation, and repairs completed as well as the educational, energy and environmental benefits of such projects.
- Brings innovative projects to scale by requiring the Secretary of Education, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, to disseminate best practices in school construction and to provide technical assistance to states and school districts.
Provide additional aid to Gulf Coast schools still recovering from Hurricanes Katrina and Rita
- Provides $70 million over two years for public elementary and secondary schools that were damaged by Hurricanes Katrina and Rita. Many students still attend school in temporary classrooms.
Ensure fair wages and benefits for workers by applying Davis-Bacon protections to all grants for instructional facility modernization, renovation, and repair projects
- Higher Pell Grant scholarship of $5,550 in 2010 and $6,900 in 2019.
About 6 million students received the Pell Grant scholarship in 2007-2008.
- Lower interest rates on need-based (subsidized) federal student loans.
Nationwide about 5.5 million students borrow these loans each year.
- More access to Perkins loan program by expanding it to every U.S. college campus.
Last year approximately 495,000 students received a Perkins Loan.
- Shorter, simpler FAFSA form that makes applying for financial aid easier.
In 2003-2004, over 1.5 million college students who likely were eligible to receive Pell Grants didn’t apply for financial aid because they found the FAFSA form too confusing.
Better Opportunities to Prepare for Good Jobs
- New college access and completion programs to help you stay in school and graduate.
- Innovative partnerships between colleges, businesses and job training programs to help you get the real-world experience and skills you need to be ready for the jobs of the future.
- Free, high-quality, online training and high school and college courses.
Financial Aid Programs That Are Worry-Free and Operate In Your Best Interest
- Gives you the peace of mind of knowing that your federal student loans are stable.
- Removes any potential for conflicts of interest between lenders and colleges.
- Guarantees you the best customer service available when you repay your student loans.
Here it is in its entirety:
Fix loan system for a stronger future
By: Rep. George Miller
This summer, millions of students will sit down with their families to figure out how to pay for college. They will unwittingly enter into a financial lending system that is badly broken — and not benefiting them as intended.
However, if Congress and President Barack Obama are successful, this system is about to undergo a major change.
The college financing system that was supposed to ensure all students access to college is dangerously out of control, for three reasons.
First, tuition has skyrocketed and shows no signs of abating.
Second, the roller-coaster credit markets have put the federally guaranteed student loan program, which for years has originated almost three-quarters of all federal college loans, on life support.
Investing in Students, Not Banks
The Student Aid and Fiscal Responsibility Act invests billions of dollars in students and families, at no costs to taxpayers. Not surprisingly, critics are using scare tactics to try to mislead the American public about this effort. They’re desperate to preserve the status quo – a system that for too long has favored banks at the expense of students and taxpayers.
"This program will provide much-needed relief to Illinois students and families who are already struggling in this tough economy," said U.S. Rep. Phil Hare, D-Rock Island, who approved the legislation. "We should be rewarding those who pursue a higher education, not crippling them with debt. When the best and the brightest students can afford to go to college, we all benefit."
Learn more about the College Cost Reduction and Access Act and read other blog posts highlighting the many benefits.
The Washington Post explains how this benefit works:
Under the Public Service Loan Forgiveness Program, the Obama administration announced yesterday [although this provision was enacted 2 years ago by Congress], people with student loans can have their debts erased after 10 years of public service. Let's say Dr. Feelgood graduates from medical school with a mountain of student loan debt. Her heart, and a little angel on one shoulder, tell her to work in a clinic serving a low-income community on tribal lands, but that little devil on her other shoulder says to become a plastic surgeon in Beverly Hills. And the little devil is holding her empty pocketbook as evidence to back his case.and the Daily Texan speaks to a student who will benefit from the new provision because she is entering public service.
If the doctor follows her heart and makes 120 payments -- one a month for 10 years -- on her student loan, Uncle Sam will tell her to forget the rest of the money she owes.
Elisheba Evans, a former UT English student who transferred to the University of North Texas, is paying off her UT-Austin student loans.Learn more about public service loan forgiveness (pdf) and read other blog posts on the benefits from the College Cost Reduction and Access Act.
She said the program’s forgiveness clause will benefit her in her career choice as a science teacher.
“It’s good that there is a system in place to reward people going into [public service] because you aren’t making that much at all,” Evans said.
These benefits were enacted as part of the College Cost Reduction and Access Act, a law I sponsored in 2007 that made historic investments to help more Americans earn a college degree. With the economy against this year’s college graduates, this relief couldn’t come at a better time.
“This help couldn’t be coming at a better time for borrowers in this tough economy, or for current and future students facing an escalating college affordability crisis,” said U.S. Rep. George Miller (D-CA), chair of the House Education and Labor Committee. “These benefits will make a serious difference for students and families working very hard to pay for college, and will provide millions of borrowers more flexibility in choosing a career they truly desire rather than one made necessary due to crippling student debt.”
“Under this new program, students no longer have to choose between serving their nation and communities and tackling a mountain of college debt,” explained U.S. Senator Edward M. Kennedy (D-MA). “Our nation is better and stronger when the best and brightest young Americans choose careers in public service.”
“These benefits are guaranteed, no matter what happens in our economy, and are kicking in at exactly the right time for millions of Americans,” said Representative George Miller, Democrat of California and chairman of the House education committee.
See Chairman Miller's complete statement here.
Source: IBRinfo.org
“Confusing paperwork shouldn’t stand between qualified students and a college degree,” said Rep. George Miller, a California Democrat who is chairman of the House Committee on Education and Labor. A law passed last year helped, creating a two-page form for some low-income families.
We encourage you to read the entire editorial and to learn from the Department of Education.
“Confusing paperwork shouldn’t stand between qualified students and a college degree. As families’ needs for college aid continue to grow in this economy, we have to ensure that students and parents can access an easy-to-navigate financial aid process designed to help them get the federal aid they are eligible for. Secretary Duncan has put forth commonsense proposals for streamlining the FAFSA, and Congress will examine how we can build on these steps as we work to make college more affordable by safeguarding and strengthening our federal student aid programs.”
But what if you have a job, but not a lot of income? Under the Income-Based Repayment plan (IBR) your payments are capped to no more than 15% of discretionary income, an amount that is based on the federal poverty guideline. "Discretionary income" is defined as the difference between adjusted gross income and 150 percent of the federal poverty line that corresponds to your family size and the state you live in (from www.finaid.org).
These new options apply to the Stafford, Grad Plus and federal consolidated loans and your loans must be in good standing. If you are unemployed, you can apply for a deferment of up to 3 years. Read the entire article and visit www.ibrinfo.org to learn more about the income-based repayment plan.
First, income-based repayment will only be available for federal student loans that are in good standing. Under this plan, borrowers' monthly payments will be capped at 15% of the amount by which their income exceeds the federal poverty level (currently $16,245).There are additional circumstances for married couples filing jointly, students in deferment, and medical students to consider. We encourage you to read the entire article (and use their cool income-based repayment calculator to see your potential monthly savings).
Let's say you have an adjusted gross income of $30,000. That means your pay exceeds the federal poverty level by $13,755 a year, or $1,146.25 a month. Under the new program, you would owe 15% of that amount, or $171.94, per month, regardless of your total outstanding loan balance.
If you left school owing $40,000 in federal loans, you would pay $460.32 a month under the standard 10-year plan. By choosing the income-based repayment plan, you would save 63% per month (by lengthening the life of the loan, however, you will end up paying more in interest over time.)
This is a system that goes something like this:We encourage you to learn more about the President's proposal, read the entire editorial and review the highlights from our recent hearing on this subject.
Are you with me so far? Wait, I see a hand waving back there. What’s that, sir? You want to know why the government doesn’t just lend the money out itself? Excellent question!
- We the taxpayers pay the banks to make loans to students.
- We the taxpayers then guarantee the loans so the banks won’t lose money if the students don’t pay.
- We the taxpayers then buy back the loans from the banks so they can make more loans to students, for which we will then pay them more rewards.
The White House estimates that it could save about $94 billion over 10 years if it cut out all the middlemen. And it has the basis of a system in place, since the Department of Education already makes a lot of direct loans to students.
In the last year, the crises in the credit markets and the economy have dramatically altered the student loan landscape, putting the federally-guaranteed student loan program that private lenders participate in on life support. As a result, the student loan programs aren’t working as effectively as they could be for students, families or taxpayers, witnesses explained.
“The status quo has become impossible to defend. Students and families are not being served as well as they could be and taxpayers are spending billions of dollars annually to finance a broken system,” said U.S. Rep. George Miller (D-CA), the chairman of the committee. “Momentum is building for reforms that will deliver aid to families in a more stable and sustainable way, shielded from any ups and downs in the markets. We can either continue sending billions of dollars to banks and lenders or we can start sending it to students who need more help than ever paying for college in this economy.”
One of the proposals the committee will examine is President Obama’s FY 2010 budget proposal, which would increase the Pell Grant scholarship and other forms of student aid by almost $100 billion over ten years – and at no cost to taxpayers. The President’s plan would be paid for by ending the subsidies the federal government currently pays to lenders in the federally-guaranteed student loan programs and re-directing those savings back into additional aid for low- and middle-income students
An article in Newsday recently declared that the “recession is pushing college out of reach.” That’s a sobering thought—particularly because a college education can be a key path to a stronger financial future for many Americans.
Current statistics on costs at local colleges and universities help explain why this is the case. At Stony Brook University on Long Island, the average debt incurred by 2007 graduates had increased by 9% over the previous year. That’s nearly three times the annual cost of living adjustment. Completing college in New York or any other state is an increasingly expensive proposition: the average student graduates with nearly $22,000 in debt. With the current economic downturn, a college degree may appear even further out of reach for many Americans.
As a former college administrator, I understand the importance of college affordability for American students. I am heartened by the steps that President Obama and my Congressional colleagues have taken to date, including the passage of the American Recovery and Reinvestment Act of 2009. This legislation includes billions of dollars to repair and construct school facilities and improve services for the children most in need, which will better prepare our next generation for the challenges of college and the globalized economy.
On July 1st, some new benefits for students will go into effect thanks to the College Cost Reduction and Access Act. On July 1, the interest rate on need-based federal student loans will be reduced to 5.6% down from the current 6% (rates will drop even further to 3.4% by 2011). The maximum Pell Grant scholarship will increase to $5,350 which will reduce the amount that students need to borrow in the first place. In addition, monthly loan payments may be capped at 15% of discretionary income, so student loans will become less of a burden on young people getting started in their careers.
Alex, a student on Long Island who will graduate with a whopping $70,000 in debt, puts it well: “Higher education shouldn’t come at the price of indebtedness for life.”
That’s a goal for our college graduates on which I hope we all can agree.
We can get there by increasing grant aid from all sources (federal, state, and institutional), making it less expensive for students and families to borrow, and working with institutions to implement best practices to hold down costs.
Starting July 1, there will be new help for recent grads -- or those who have been out of school for a while and are struggling to repay student loans. The new federal Income-Based Repayment program will allow those with low incomes to pay as little as zero on their student loans, as long as they qualify based on income and amount of debt.The rules are a little complicated, but you can visit www.IBRinfo.org. to use their online calculator to see if you are eligible.
Additional benefits that start on July 1 from the College Cost Reduction and Access Act include:
- increase in Pell Grants
- reduction in interest rates on federal loans from 6.0% to 5.6%
- TEACH grants for qualified undergraduate students who commit to teaching in public schools in high-poverty communities or high-need subject areas.
- Loan forgiveness after 10 years for public servants
On Wednesday, May 20, U.S. Education Secretary Arne Duncan will testify before the House Education and Labor Committee about President Obama’s agenda for transforming American education. This will mark Secretary’s first appearance on Capitol Hill to outline the President’s education goals.
On Thursday, May 21, the House Education and Labor Committee will hold a hearing to examine proposals that will make historic increases in college aid by enacting reforms that will make the nation’s federal student loan programs more reliable, effective and efficient for students, families and taxpayers.
One of the proposals the committee will examine is President Obama’s FY 2010 budget proposal, which would increase the Pell Grant scholarship and other forms of student aid by almost $100 billion over ten years – and at no cost to taxpayers. The President’s plan would be paid for by ending the subsidies the federal government currently pays to lenders in the federally-guaranteed student loan programs and re-directing those savings back into additional aid for low- and middle-income students.
One of the proposals the committee will examine is President Obama’s FY 2010 budget proposal, which would increase the Pell Grant scholarship and other forms of student aid by almost $100 billion over ten years – and at no cost to taxpayers. The President’s plan would be paid for by ending the subsidies the federal government currently pays to lenders in the federally-guaranteed student loan programs and re-directing those savings back into additional aid for low- and middle-income students.
WHAT:
Hearing on “Increasing Student Aid through Loan Reform”
WHO:
Witnesses TBA
WHEN:
Thursday, May 21, 2009
10:00 a.m. ET
Please check the Committee schedule for potential updates »
WHERE:
House Education and Labor Committee Hearing Room
2175 Rayburn House Office Building
Washington, D.C.
The benefits were established under the College Cost Reduction and Access Act, a law Congress enacted in 2007 that provided an additional $20 billion in federal student aid for students at no additional cost to taxpayers.
This year’s class of graduating college seniors also enters one of the toughest jobs markets in decades for recent graduates. Of the 1.2 million jobs lost last year, 60 percent were held by workers aged 25 or younger. Their wages may also suffer: Economists have found that workers who graduated during recessions typically earn less over a lifetime than workers who graduate in better economic times. Many borrowers already spend high percentages of their paychecks making student loan payments – and it’s only likely to get worse.
Given these challenges, it’s critical for current college students, new or soon-to-be graduates, and workers to know about new benefits that went into effect July 1, 2009 that will make student loan payments manageable for millions of Americans. (These benefits were signed into law in 2007 as part of the College Cost Reduction and Access Act.) They include:
“As we continue working to turn our economy around, we have to do everything we can to help the millions of Americans who have suffered job losses in this recession get the education, training and skills they need to return to the workforce. President Obama’s initiatives are commonsense steps that will make college and training programs more accessible and affordable for laid-off workers by allowing them to enroll in postsecondary education without forfeiting their unemployment benefits. In addition, it’s critical that he reminded financial aid officers that they can adjust financial aid packages based on recent layoffs, so families aren’t paying for college based on incomes they no longer earn.
Currently, people who are out of work and want to go back to school have to give up their monthly unemployment check. And if they decide to return to school, they often don't qualify for federal grants because eligibility is based upon the previous year's income.In addition to making it easier for those out of work to return for additional training, President Obama has been pushing for a transformation of the federal loan program to save taxpayers money and ensure stability for students. This USA Today editorial explains why this reform is important.
The student lending market is far smaller than the housing market. But it raises a similar question: Does it make sense for the government to pump its education dollars through banks — which divert some of the money for their own profits, wine and dine college financial aid officers to get on "preferred lender" lists, and lobby Washington to keep the spigot open?
The administration estimates it can save as much as $94 billion over 10 years by eliminating middlemen and lending directly. Even if that number is exaggerated, it reflects how inefficiently taxpayers' money is being spent. Banks shouldn't need major subsidies to issue guaranteed student loans.
To learn more about President Obama's proposal click here.
While Brennan’s situation, and the remedy he is pursuing, may sound extremely ambitious, guidance counselors across the country say they can recall no prior year in which so many applicants’ families have been squeezed by so many financial pressures.President Obama has put forth a solid plan to make federal student loans more reliable, while saving taxpayers billions of dollars. To learn about the President's proposal, click here.
Not only have families’ incomes been falling as their savings have dwindled, but also tuition has been rising — including proposed increases of nearly 10 percent next year throughout the University of California system....Interest rates on student loans, including on popular federal programs like the unsubsidized Stafford (now nearly 7 percent) and Parent Plus (8.5 percent), are running several percentage points higher than the rates on secured loans, like home equity lines of credit.
“The difference of rates between secured and unsecured loans is higher than I have ever seen,” said Scott White, director of counseling services at Westfield High School in New Jersey. “This is one further impediment to access to post-secondary education for all but the well-to-do.”
Will Congress pass Obama's student loan plan?
This proposal would not threaten private lenders' ability to make private loans to college students at unregulated (and often highly profitable) interest rates. It would simply allow the federal government to keep the profits from loans it already subsidizes, instead of handing them over to banks. It would improve efficiency and save money, and it should have been passed a long time ago.
And there is more at the San Francisco Chronicle and we encourage you to read the entire editorial.
To learn more about where Chairman Miller stands on this proposal, see his statement on President Obama's budget.
Private companies that reap undeserved profits from the federal student-loan program are gearing up to kill a White House plan that would get them off the dole and redirect the savings to federal scholarships for the needy. Instead of knuckling under to the powerful lending lobby, as it has so often done in the past, Congress needs to finally put the taxpayers’ interests first. That means embracing President Obama’s plan.
This builds upon Rep. Miller and the Education and Labor Committee's efforts in the 110th Congress.
We encourage you to read the entire editorial. And these from the Syracuse Post-Standard and the Albany Times Union.
CNN Money has an article about how specific provisions in the College Cost Reduction Act of 2007 can help recent graduates.
Under the College Cost Reduction and Access Act of 2007, two federal loan forgiveness programs could provide greater assistance to those who decide to pursue careers that serve the public. Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF) could make student loan forgiveness much more accessible to the masses.We encourage you to read the entire article to learn more about the two provisions, as well as visit the Department of Labor's website for the IBR and PSLF provisions.
"Both of these programs are much more widely available than anything that's been available in the past," says Irons.
The budget rightly calls for phasing out the wasteful and all-too-corruptible portion of the student program that relies on private lenders. And it calls for expanding the less-expensive and more-efficient program that allows students to borrow directly from the federal government. That means doing away with the Federal Family Education Loan Program, under which private lenders receive unnecessary subsidies to make risk-free student loans that are guaranteed by taxpayers.
This builds upon Rep. Miller and the Education and Labor Committee's efforts in the 110th Congress.
We encourage you to read the entire editorial.
A well-trained, college-educated workforce is key to a strong American economy and middle class. The economic crisis, combined with rising tuition prices and declining state support for higher education, threatens to put college out of reach for many students – forcing them to take a semester off or even skip college. Allowing students to be priced out of a college education will only further weaken our workforce and our economy. Economists, the business community, scientists and others agree that making strategic investments in education is a smart move to grow our economy and regain our competitive edge in the 21st century global economy.
The American Recovery and Reinvestment Act will help college students and families pay for college by significantly boosting federal student aid. It builds on the groundwork laid by the 110th Congress to make college more affordable and accessible for all qualified students. The legislation will:
WASHINGTON D.C. – U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, issued the following statement today after U.S. Treasury Secretary Henry Paulson announced a new plan to bolster consumer lending, including student loans. The plan would allow investors to obtain a loan from the Federal Reserve, using student-loan and other asset-backed securities as collateral, potentially providing more funding to lenders to extend consumer credit.
A report released by the National Math Panel in March found that the nation’s system for teaching math is “broken and must be fixed” if the U.S. wants to maintain its competitive edge. In May, the Committee first examined the report’s findings and recommendations; this hearing follows up on that hearing.