Aid bill praised as big boon to students

110th congress
Measure passed by Congress cuts student loan interest rates, increases Pell grants

By Steve Hinnefeld 331-4374
shinnefeld@heraldt.com
September 12, 2007

College students will pay less interest on their college loans and some will be eligible for larger federal Pell grants under legislation approved last week by Congress.

Both the House and Senate approved the final measure on Friday, with leaders touting it as the largest federal investment in higher education since the GI Bill in the aftermath of World War II.

The changes could make a difference for thousands of students at Indiana University and Ivy Tech Community College, officials said.

“I think all this is very good for students, especially since the cost of attendance continues to go up,” said Lori Handy, director of enrollment services at Ivy Tech-Bloomington.

Joe DeJean, IU student body vice president, called the bill “the most meaningful higher education reform in more than 15 years” in a statement distributed by the Indiana Public Interest Research Group, a student-led advocacy organization.

Called the College Cost Reduction and Access Act, the legislation:

• Cuts interest rates on government-subsidized loans in half, from 6.8 percent to 3.4 percent, during the next four years.
• Increases the maximum Pell grant for low-income students by at least $1,090 over five years, reaching $5,400 by 2012.
• Expands eligibility for grants, creates loan-forgiveness programs for public service and sets up a repayment program that lets borrowers repay loans as a percentage of their income.

Approved by votes of 79-12 in the Senate and 292-97 in the House, the bill will pay for the $21 billion in expanded aid by cutting government subsidies for lending companies and loan guarantee agencies.

“The steps taken today by Congress will help ensure that students who work hard, sacrifice and make the grade will have the chance to earn a college degree,” Sen. Evan Bayh, D-Ind., said in a statement.

Rep. Baron Hill, D-Ind., supported the bill and was glad it passed, said spokeswoman Katie Moreau. “It’s an extremely comprehensive piece of legislation,” she said.

College lenders fought the measure, saying the subsidy cuts would hurt customer service and reduce “borrower benefits,” such as paid loan origination fees and reduced interest rates for on-time payments.

One lender, Lincoln, Neb.-based Nelnet, blamed the bill last week when it announced it would cut expenses and lay off hundreds of employees, including 265 in Indianapolis. A day later, Chase Education Finance, another college lender, said it would offer jobs to 150 of the Indianapolis workers who lost jobs.

President Bush threatened to veto earlier versions of the legislation but dropped his opposition when Congress increased Pell grant funding and compromised on the number of new student-access programs.

At Indiana University Bloomington, about 15 percent of students receive Pell grants, which are awarded on the basis of financial need. More than half of 2005-06 IU graduates borrowed money to pay for school, and graduates owed an average of about $20,000, according to IU figures.

IU this year began a program called Pell Promise that supplements Pell grants to provide full tuition funding for low-income students with high grade-point averages and admissions-test scores.

At Ivy Tech-Bloomington, 1,775 students — just over one-third of the total — got Pell grants this year, totaling $2.6 million, Handy said. Some 1,682 Ivy Tech students will receive $5 million this year in federal Stafford loans.

Handy said the expanded eligibility and increased maximum for Pell grants should keep some students from having to run up so much debt.

“It will help tremendously,” she said. “Maybe students won’t have to borrow so much.”