Higher education is becoming critical to success in our economy, yet it is becoming increasingly unaffordable and inaccessible. Democrats recognize that students and their families are struggling to cover the rising cost of college and have made college affordability a top priority. That is why under Democratic leadership, Congress overwhelmingly approved the College Cost Reduction and Access Act, legislation that will increase access to higher education and ensure that scarce federal dollars are going where they are most needed – to students. On September 18, Congress submitted this legislation to the President, who is expected to sign it. This landmark legislation will:
· Increase student aid for low- and middle-income students.The College Cost Reduction and Access Act will provide over $20 billion in new student aid and benefits – the largest increase in student aid since the G.I. bill. The federal Pell Grant program has proven to be indispensable for millions of students who might not otherwise have had the financial resources to pursue a college degree. But the maximum Pell Grant award has not kept pace with the rising cost of college. While twenty years ago, the maximum Pell Grant covered 51 percent of the cost of tuition, fees, room and board at a public four-year college, it covered only about one-third of those costs in the 2005-2006 academic year. (Analysis of Department of Education data) The College Cost Reduction and Access Act will make college more affordable by:
· Raising the maximum Pell Grant by $500 next year to $4,800, and to $5,400 by 2012 – an increase of more than 25 percent over the next five years;
· Simplifying the financial aid process for low-income students by increasing the income level at which a student is automatically eligible for the maximum Pell Grant; and
· Increasing the amount of student income sheltered from the financial aid calculation process, thereby reducing the existing penalty on students who work.
· Ease the burden of student loan debt. More than 60 percent of undergraduates at four-year colleges have to take out loans, and the average amount of federal student loan debt upon graduation has increased from $7,663 in 1992-1993 to $17,400 in 2003-2004. When private loans are factored in as well, average student loan debt in 2003-2004 was more than $19,000. (National Postsecondary Student Aid Study 1993 and 2004, National Center for Education Statistics) These increased debt burdens are affecting graduates’ career and personal decisions. The Higher Education Access Act will help make student loan debt more manageable by:
· Capping monthly federal student loan payments at 15 percent of a borrower’s discretionary income; and
· Reducing the interest rate on subsidized student loans from 6.8 to 3.4 percent over five years.
· Provide incentives for students to commit to teaching and other public service. Student loan debt can deter some graduates from pursuing public service careers such as teaching and social work. Pursuing these modestly-paid but essential careers would leave some graduates with an unmanageable level of student debt. (State PIRGs’ Higher Education Project, April 2006) The College Cost Reduction and Access Act will help graduates manage their debt and encourage public service by providing loan forgiveness for borrowers who work in public service careers such as nursing, teaching, law enforcement, or the military, for 10 years. To address our nation’s shortage of high-quality, well-prepared teachers, the legislation will also encourage good teachers to work in high-need schools; new TEACH Grants will provide scholarships of $4,000 per year for high-achieving undergraduate and graduate students who commit to teaching in a high-need subject in a high-need school for four years.
· Increase access to higher education. The College Cost Reduction and Access Act will increase preparation for and access to college. Specifically, the legislation will create College Access Challenge Grants to increase college outreach activities in every state, and will restore funding for Upward Bound, a program that seeks to increase high school completion and college participation and graduation rates among low-income students and first-generation college students. The legislation will also strengthen minority serving institutions, which are responsible for serving many of our nation’s minority students who would not otherwise obtain a degree; the College Cost Reduction and Access Act will invest an additional $500 million in these institutions.
· Reform the student loan system so it works for students, not banks. While students struggle to pay off their loans, the lenders who offer loans to students are making record profits. The federal government still pays large subsidies to lenders who participate in the federal student loan program — a relic from the program’s inception forty years ago when it was believed that incentives were needed to encourage lenders to take part in the program. Moreover, recent investigations have shown that lenders have been exploiting the student loan system, to the detriment of the very students they are supposed to be helping. The College Cost Reduction and Access Act will provide benefits to students at no cost to taxpayers by reducing excessive lender subsidies and redirecting these funds to students who need it most. The legislation will also establish a pilot program to encourage market competition among lenders, so that they are not overcompensated for the services they provide to students.