Student loans got you down? Well, get ready for what is being touted as the biggest increase in higher-education funding since the GI Bill enabled millions of veterans to attend college after World War II. On Wednesday (July 11), the House of Representatives passed the College Cost Reduction Act of 2007 and — pay attention — backers say it could save students thousands of dollars.
The bill passed by a vote of 273-149, and the Senate is set to take up the issue later this month. The White House released a statement on Tuesday that stated the president would veto the bill in its current form, arguing it does not do enough to benefit low-income students.
Student loan debt has more than doubled over the past 10 years. The average college graduate in the U.S. will leave school this year owing $19,200, according to the nonprofit Project on Student Debt. You don't need a major in math to figure out that's a lot of money.
"We said we would offer a comprehensive college cost-reduction plan," said House Education and Labor Committee Chairman George Miller (D-CA), who took the position when the Democrats gained control of Congress in January (see "House Democrats Complete '100-Hour' Promise Ô But Has Anything Changed?"). "And that's what we are doing."
The bill he sent to the House floor aims to change the following:
Loans: Interest rates on federal loans and federally subsidized loans will be cut in half in the next five years. For example, need-based Stafford Loans would go from 6.8 to 3.4 percent over the next four years. That could save the typical borrower $4,400 over the life of a $13,800 loan, according to the House Education and Labor Committee. More students would be eligible for loans under the new act. There is also a neat provision that would limit your annual loan payback to 15 percent of your discretionary income. That way you can have your ramen and eat it too!
Pell Grants: These grants for low-income students capped out at $4,050 in 2006. The bill would not only increase that figure to $5,200 but also increase eligibility to about 600,000 more students. That's money you never have to pay back.
Tuition assistance: Undergraduates and graduate students who plan to teach in public schools would be able to get an extra $4,000 a year on top of loans and federal grants. The average starting salary for public secondary school teachers is around $31,500, according to data from the National Education Association. That doesn't leave much money for loan repayment.
Loan forgiveness: If you choose to go into a field that doesn't pay a surgeon's salary but benefits the common good, some of your debt could be forgiven. Yes, that means erased. The bill would take $5,000 off your debt if you decide to become a first responder, nurse or public defender, among other careers. Other jobs in the public sector would qualify for complete loan forgiveness if you spend 10 years on the job paying off your debt. The relief won't apply if you decide to become a congressman, however.
So where is the money set to come from, for all of this college-bound collateral? Well, the bill will take away some federal subsidies from private lenders that are also big players in the education-finance game — which doesn't make those businesses very happy. The American Student Loan Services, a company that finances private loans, released a statement arguing the bill would actually limit choices students and families have for lenders and, therefore, lead to higher costs and fewer services.
"The majority of people will still go to private loan companies, I don't think that will change much," Representative Miller countered in an interview with MTV News on Wednesday. "What we did is took subsidies away from the lenders and recycled them for the students. The vast majority of the 3,000 lenders, they won't make as much money, but they'll still be there.
"And hopefully," he added after a moment, "we'll also be able to solve some of the ethical problems these private loan companies have."