Congressional Democrats on March 18 trimmed their original student loan plans, reduced spending for community colleges, and eliminated early childhood money from a broad rewrite of a college aid bill piggybacked on to fast-track health care legislation.
The student loan measure would be the biggest change in college assistance programs since Congress created them in the 1960s, ending a private-lender program by having the government originate all loans to needy students.
But facing savings smaller than anticipated from the switch and a shortfall in Pell Grant money for low-income students, Democrats are proposing no increases in over the next two years and a modest increase over the five years that follow.
“We’re hoping by then our economy will be better, we will be out of the doldrums and we’ll be able to address the situation at that time,” said Iowa, the chairman of the Senate Health, Education, Labor, and Pensions Committee. “What we’re doing here is taking care of the next few years.”, D-
The maximum Pell Grant, which a House-passed bill last year would have raised to $6,900 over 10 years, will now only increase to $5,900. The current maximum grant for the coming school year is $5,500.
“This isn’t even maintaining a fiction of maintaining the status quo,” said Mark Kantrowitz, who runs the Web site finaid.org. “This is going to lose ground.”
Consolidating the college aid package with health care could make it easier to pass the college aid plan in the Senate, where it seemed unable to muster 60 votes to overcome procedural hurdles. And it would give House Democrats a popular incentive to sweeten a vote for health care changes.
The House plans to take up the legislation this weekend. The Senate would follow next week.
The new bill would spend $13.6 billion to fill a financial hole in the Pell Grant program, but would still leave a $5.5 billion shortfall. Officials say a poor jobs market has driven potential workers to colleges and technical schools, putting a strain on the program.
Student aid reform advocates were energized last week when Congressional leaders said the legislation had new life.
The lending overhaul—pushed in recent weeks by Education Secretary Arne Duncan—would allow the federal government to lend money directly to students, instead of having students go through commercial lenders. Duncan said SAFRA would save taxpayers $87 billion over 10 years by doing away with subsidies to private lending companies, who then tack on interest to student loan payments.
Democrats on the fence about the lending bill have said in recent weeks that Student Aid and Fiscal Responsibility Act (SAFRA) would increase the national deficit during an era of record-breaking debt.
Campus Progress, an organization pushing for direct lending, refuted these claims, echoing Duncan’s stance that federal projections show billions of dollars in savings over the next decade when compared with the current Federal Family Education Loan (FFEL) program.
“Switching from the FFEL student loan program to direct lending by itself will reduce, not increase, the deficit,” the group said. “Members of Congress who defend FFEL are acting to increase the deficit.”
SAFRA seemed to be on the verge of passing last fall when Duncan sent a letter to 3,500 colleges and universities in October, urging them to “ensure uninterrupted access to federal student loans by ensuring your institution is direct loan-ready for the 2010-11 academic year.” Since then, more college leaders have moved to a direct-lending model.
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