Democratic leaders in the House of Representatives introduced legislation that will increase college financial aid by nearly $20 billion over the next five years, while also aiming to cut the interest rate on federally subsidized student loans to 3.4 percent, costing U.S. taxpayers no new costs.
U.S. representative George Miller (D-CA), chairman of the House Education and Labor Committee, unveiled the bill, which is known to be the largest investment relating to college financial aid since the GI Bill of 1944. Miller plans to take $20 billion in federal funds away from lenders and redistribute most of the funds to students and borrowers in the form of increased Pell Grants, while lowering the interest rates of student loans.
The measure would also reduce the deficit by $750 million, while spending most of the funds on higher educational programs and student aid.
Dan Quigley, an environmental biology major at CSUN, believes the bill should be nothing but beneficial to students.
“To me it sounds like a good idea, but in a way it also sounds like there’s a catch that we don’t know about,” said Quigley. “Students do need more money to go to school and it seems like we still don’t get enough.”
Other features of the bill include increasing the Pell Grant by $100 a year for five years beginning in 2008, letting students use their grants year-round, instituting a system of repayment based on income, increasing the amount that working students can earn without reducing their financial aid rewards and increasing the limits on how much students can borrow from federal loan programs.
Miller believes that while the federal student aid programs waste billions of dollars from taxpayers on subsidies to lenders, the money should be given to college students who need the money for college. The savings from decreasing subsidies can be used to increase student aid by giving more scholarships and reducing future debt that students may have after they graduate.
“If this means giving me more funds for school and a low interest rate after I graduate, than I’m all for it,” Quigley said. “But I doubt it will pass, it seems too good to be true.”
In addition to lowering interest rates on student loans and increasing federal loans, the proposed legislation will also create two new grant programs intended to help students. One scholarship will be provided to those students who teach in a “national need area” for several years after graduation, and the second will provide matching federal funds to charities that help and encourage needy students to attend college.
Gregorio Alcantar, a Debt Management Counselor for the financial aid department at CSUN, comments on one problem that the financial aid department experiences, rising tuition.
“When tuition rises, the financial aid program is not able to catch up with their costs in order to provide enough funds for students, such as fees and housing,” Alcantar said.