WASHINGTON, D.C.–(ENEWSPF)–March 25, 2010. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions Committee, today announced that landmark legislation to make college more affordable and accessible had passed the U.S. Senate. The legislation must now go to the U.S. House for a final vote before heading to the President’s desk for his signature.
The Student Aid and Fiscal Responsibility Act of 2010 was approved today by a vote of 56-43. Prior to the measure being considered in the Senate, it was voted on by the House of Representatives with a 220-211 vote. The measure eliminates billions of dollars in wasteful subsidies to banks and redirects that money to students and families in the form of increased Pell Grants to low-income college students, one of President Obama’s key education priorities.
Similar to what President Obama proposed in his FY 2010 budget, the bill will originate all new federal student loans through the Direct Loan program starting in 2010, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to affordable college loans, at the same low interest rates, terms and conditions, no matter what happens in the economy.
The bill was part of the reconciliation package that was used to provide technical fixes to health reform.
“The status quo in student lending is a bizarre Rube Goldberg process that makes no sense,” said Harkin. “This bill eliminates the billion dollars in wasteful subsidies to banks and redirects most of that money to low-income college students in the form of increased Pell Grants. “As Americans tighten their belts and make smart choices with their money, Congress should too. We cannot continue this blatant corporate welfare.”
U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee said: “With Senator Harkin’s leadership, today the Senate voted to stand with America’s students, families, and taxpayers, instead of banks and their well-financed lobbyists. The Senate took this once-in-a-lifetime opportunity to stop wasting $61 billion of taxpayers’ money subsidizing banks in our student loan programs, and instead use that money to directly help students pay for college and reduce the deficit. This vote was an enormous victory for students, who will get much-needed college aid, for taxpayers, who will see their dollars spent more responsible, and for our nation’s economic future.”
Currently, the federal student loan program provides subsidies to banks to make student loans, or makes them directly to students at a much reduced cost to the government. The education reconciliation bill saves $61 billion over the next ten years by ending the subsidies to banks, and reinvests most of that savings into Pell Grants. It also preserves a role for non-profit lenders to service student loans and continue their student outreach and support activities.
Specifically, the education reconciliation measure will:
Provide increases in the maximum Pell Grant award to keep up with inflation. The bill increases the maximum award to $5,550 next year and to almost $6,000 by 2017, by indexing the award to the Consumer Price Index starting in 2013 to match rising costs-of-living for five years. The Bureau of Labor Statistics projects that by the year 2018 nearly 75 percent of all new jobs will require at least an associate’s degree. In the 2008-2009 award year, 6.2 million Americans relied on Pell Grants to help pay for college and career training. Eighty-nine percent of those students came from families making less than $40,000. A strong Pell Grant program is essential to help a new generation of Americans enter college or workers return for training to gain the education and skills needed for jobs in the 21st century economy.
Make college more affordable and accessible. Under the current maximum award, 8.7 million students would receive Pell Grants in 2011-2012. If the FY 2011 Pell Grant program shortfall of over $19 billion is not addressed, the maximum award could decrease to $2,150 and nearly 600,000 students could lose the benefit entirely. The education reconciliation bill offers an opportunity to put Pell grants on a more solid footing by addressing most of the FY 2011 Pell Grant shortfall. Shoring up the program by passing the education reconciliation measure would help Congress avoid massive cuts to education and other critical domestic spending priorities.
Reduce the deficit. This bill provides more than $10 billion in deficit reduction to exceed the reconciliation instruction issued to the HELP Committee.
Provide funding for Minority-serving Institutions. The bill continues funding provided in the 2007 education reconciliation bill for Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other MSIs. It provides $2.55 billion to support the critical role these institutions play in educating our country’s low-income and minority students.
Support non-profit lenders. The bill entitles qualified non-profit lenders to service Direct Loans and provides about $1.5 billion in additional funding to pay for these efforts.
Bolster Community Colleges. The bill makes a major new investment of $2 billion over four years in community colleges. The Community College and Career Training Grant program will support programs and courses designed to help unemployed Americans and other individuals facing barriers to employment. The bill more than doubles the 2007 reconciliation bill’s investment in the College Access Challenge Grant program, providing $750 million for students. These formula grants to states help organizations provide services that increase the number of low-income students who are prepared to enter and succeed in college and manage their student loans, such as financial literacy and debt management skills.
Make Loan Repayment More Manageable. Starting in 2014, the bill lowers the burden of student debt by capping a new borrower’s loan payment at 10 percent of their net income, after adjustments for basic living costs, and forgiving any remaining debt after 20 years.
For a myth/fact document on the legislation, click here: http://harkin.senate.gov/documents/pdf/4ba24139781c1.pdf