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Proposed
Law Tries to Make College More Affordable |
Posted:
08.15.07
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As college tuition continues to skyrocket, Democrats in Congress
are trying to make good on their promise to make college more
affordable.
Printer-friendly version: PDF
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 The
House and Senate last month passed similar versions of the College
Cost Reduction Act, which cuts in half interest rates for the
Federal Family Education Loan (FFEL) and Direct Loan (DL) programs.
The legislation would pay for the decreases by cutting $18 billion
from federal subsidies to student lenders.
"This bill is a remarkable step forward in our efforts to
help every qualified student go to college," said Democratic
Representative George Miller of California, chairman of the House
Education and Labor Committee and author of the legislation, in
a statement.
"With this bill, we are saying that no one should be denied
the opportunity to go to college simply because of the price."
A conference committee of House and Senate members will work
out a joint version of the bill when Congress returns from recess
at the end of August.
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White House
opposition |
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Under the College Cost Reduction Act, the interest rates for
federal loans would be slashed from 6.8 percent to 3.4 percent
in July 2012 if the bill is signed by President Bush. Pell Grants,
which are federal grants awarded to low-income students, would
increase from $5,100 for the 2007-2008 school year to $6,300 in
2012 under the Senate version.
 Last
year, students took out more than $85 billion in federal and private
loans to pay for college.
The White House has threatened to veto the legislation, saying
it would not do enough to help the poorest students and would
create costly new programs.
"This costly proposal only benefits students once they leave
school, when they can already take advantage of flexible repayment
options available under current law," according to a statement
from the White House.
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Lax oversight
of loan program |
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Meanwhile, an August government report criticized the Department
of Education for failing to create a system to detect misconduct
by lenders and protect student borrowers.
The Government Accountability Office said some lenders were giving
improper incentives to colleges to steer student borrowers their
way, and that in 20 years the department has
tried to punish only two lenders for violating government rules.
Earlier this year, attorneys general in New York, Missouri, Illinois,
California, Connecticut, Minnesota and Ohio announced that they
are investigating student lending practices.
The Senate also passed a bill last month that would restrict
some of the practices uncovered by the investigations and streamlines
the loan application process, Reuters reported.
Cozy relations between college financial advisers and loan companies
"may have resulted in some students taking loans with higher
interest rates or fewer borrower benefits," the report stated.
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Students
call for more protection |
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Student activists say more
action is necessary. Alan Collinge, a 1999 college graduate, told
60 Minutes that he saw his student loan debt balloon from $45,000
to $103,000 because he could not make payments, started studentloanjustice.org
in 2005.
He said Sallie Mae, a private school lender, forced him into serious
debt and was allowed to because current law treats private student
loan lenders differently from any other type of  lender.
The bills before Congress are a step in the right direction for
college students, he said, but they don't fix the most important
problems with the lenders.
"The decrease in interest rates is significant but neither
of the bills do anything to restore standard consumer protections
to student loans," he said.
Collinge said that people with student loans still have to repay
even if they declare bankruptcy and aren't protected from exorbitant
interest rates.
"A lot of people thought they were getting a safe loan,
but they were getting a high interest private loan and are stuck
paying 20 percent interest on a $40,000 loan. That's crazy,"
he said.
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--
Compiled by Quinn Bowman for NewsHour Extra
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