Posted on 07/20/2007 1:05:53 PM PDT by libertarianPA
WASHINGTON - The Senate passed a bill early Friday to increase aid to college students.
The bill would give more money to Pell grant recipients, who are among the poorest. They get a maximum award of $4,310 annually now, but that would be bumped up to $5,400 by 2011.
To pay for the proposal, lawmakers would cut roughly $18 billion in federal subsidies to banks that issue government-backed student loans.
Budget rules require that more than $700 million of that savings go toward reducing the federal deficit, but the rest would go to student benefits.
"This legislation does not cost the taxpayer. It saves the taxpayer because we are taking the money from the banks and providing it for the ... students themselves," said Sen. Edward Kennedy, D-Mass., chair of the Senate education committee.
The bill passed 78-18.
It does not cut interest rates on federally backed student loans to poor and middle-class students, something that is in a House-passed version of the bill. A House-Senate committee will now have to forge compromise legislation.
"I don't think we're going to have much trouble in the conference working through the differences," Kennedy said.
The two bills differ in how much they would give to Pell grant recipients. Other legislation also moving through Congress, including a spending bill that passed the House Thursday, also seeks to increase aid for Pell grant recipients.
Both the House and Senate student loan bills cap annual payments for students at a percentage of their income, which is aimed at preventing people from having to pay back more than they can afford.
Both bills also provide loan forgiveness for those who go into public-service professions after 10 years of making payments.
The bill follows promises Democratic lawmakers made during the last election to help lower- and middle-class college students with tuition.
The legislation is part of a must-pass bill needed to meet spending targets in the federal budget. By linking the student assistance to the budget legislation, Democrats were assured the student loan legislation could not be held up by a minority of Republicans in the Senate.
Sen. Judd Gregg, R-N.H., said doing that made a mockery of the budget process. "That process has been, for all-intensive purposes, run over," Gregg said.
A second Senate bill, expected to be considered next week, would simplify the federal financial aid application process and would address conflicts of interest in the student loan industry. It seeks to sever too-cozy relationships between banks and colleges that have been highlighted by recent federal and state investigations.
New York Attorney General Andrew Cuomo has led the investigation into conflicts of interest. He announced a settlement Friday with student lender College Loan Corp. over allegations that the San Diego company provided perks to schools that placed it on preferred lender lists.
The company agreed to pay $500,000 to a fund to educate students about financial aid and agreed to abide by an industry code of conduct developed by Cuomo. Ten other student loan companies have also reached agreements with Cuomo's office.
and the vicious cycle of artificial inflation continues.
Now, how in hell does this make any sense at all.
If the college educations are a good investment, the students should be more than willing to mortgage future earnings to pay for it. Certainly it makes more sense than confiscating the scarce resources of other citizens that don’t directly benefit from someone else’s college education to pay for it.
But, then, most libs don’t study anything except how to protest the right and I would guess that that occupation doesn’t pay very well.
The logic is way above my paygrade.
To pay for the proposal, lawmakers would cut roughly $18 billion in federal subsidies to banks that issue government-backed student loans”
“This legislation does not cost the taxpayer. It saves the taxpayer because we are taking the money from the banks and providing it for the ... students themselves,” said Sen. Edward Kennedy, D-Mass., chair of the Senate education committee.
But, if the banks aren’t receiving subsidies for low-interest student loans, won’t they raise the rates or remove themselves from the student loan program?? Don’t most middle class students finance at least a portion of their education with student loans? So, in essence, doesn’t this cost the middle class student to increase grants to the poor?
I just think it is funny that Kennedy says it doesn’t cost anyone anything (except those mean banks).
We are having now on a great number of college campuses over 60% + of all students receiving in one form or another some type of "student aid" (Loans, grants, etc). What that is indirectly saying is over 60%+ of these current customers couldn't afford their product...
If Federal monies for student loans (grants) stopped....Colleges would either reduce their prices or go out of business. Plain and simple. The perks for Prof's and sizes of upkeep for campuses today is absurd.
And...When are we ever going to hear the MSM talk about "Big College" and how their sky-rocketing prices are outlandish...and how their "revenues" are the "highest ever"...blah, blah, blah.....
If they put a stipulation in that the money can only be spent on students that are taking real courses I could agree. But obviously ancient literature, liberal arts students will still be compensated for their laziness.
I agree and sometimes feel like a fool for having paid for my entire college education, including graduate school myself; paying for my daughters college and graduate school in full; and then paying the full boat for the son of migrant workers.
It would have been a better business decision to take student aid or Government help.
In a few years, after I'm done with mathematics and computer science (real math, not wannabe math), the government will confiscate my wages to give to liberal arts graduates whose degrees are worthless, either by providing them with Federal paychecks or other Federal benefits. Plus, I will have to pay for future liberal arts college students to party away and screw around.
Ain't life grand?
Yes.
What I want to know is why none of the interest rate reductions apply to unsubsidized FFEL (private lender) Stafford Loans. The subsidized FFEL variety and the Federal Direct Loan program get discounts, however.
It seems that the Federals will eventually get rid of the FFEL private lender program and force all families on to the Direct Loan program.
Life Sucks, but the alternative is worse!
This is true. I could have Ted Kennedy and John Kerry for Senators.
That would really suck.
I'd like to thank all those Republicans who see fit to agree in wasting more of our tax dollars. Ah well just more government waste we can lay off on another loan from the Chinese. Woo-hoo!!
Ask a university president what the main reason is for rapidly increasing costs and they will tell you: government loans and grants.
I have no hope in doing anything to defeat them!
But Life goes on.
Don't you love that sound-byte wording? They aren't "taking" it from the banks. It's very democrat to make it sound as if they are confiscating the bank's money.
“for all-intensive purposes” - uh, hey there, cowboy, that’d be “all intents and purposes”. Showin’ our ignorance there a bit, ain’t we?
Other than certain degrees that involve hands on technical or lab work, why can't everyone take 120 credit hours on the Internet or gather the credits from work experience in a particular field?
I know the answer. Who then would be paying for all those buildings, maintenance, utilities, tenureships, etc. which doesn't add an ounce to learning?
The bill the Democrats in Congress passed is a travesty.
It will certainly do nothing to make College more affordable, but will only increase the overspending and inefficiency that exists today in higher education.
It ought not cost $100,000 to get a college degree, but over-generous programs allow this inefficiency and waste,
and parents and kids go along with it too.
“the government will confiscate my wages to give to liberal arts graduates whose degrees are worthless, either by providing them with Federal paychecks or other Federal benefits. Plus, I will have to pay for future liberal arts college students to party away and screw around.”
Yup. What is even worse is that Government workers will get a special “dont pay your debts” card *and* the House bill limits payments, screwing up and socializing the system further ... this is a terrible bill that will make our education system worse, more expensive, and less market-and-reality-based.
http://www.heritage.org/Research/Budget/wm1547.cfm
Good news from Congress on spending is rarely unaccompanied by bad news. The good news is that Congress and the Administration have identified wasteful spending that can be cut as part of the reauthorization of the federal government’s main higher education spending programs. Decades ago, the government put in place large subsidies to entice lenders to participate in federal student loan programs. Today these programs are popular, the lenders plentiful and highly profitable, and the subsidies unneeded. Following the Administration’s lead, the House Education and Workforce Committee reported a bill that would largely eliminate these subsidies, saving almost $38 billion over the next 10 years.
The bad news is that Congress may use most of the savings to increase other spending, including the creation of nine new entitlements in the House bill. While a tiny amount of the mandatory savings—$914 million—would be used for deficit reduction between 2008 and 2017, the bulk of the savings—some $37 billion—would be plowed right back into new spending.
Reflecting the Washington mindset, neither the House bill nor its companion legislation in the Senate includes a dime of tax relief. This is the wrong tack to take. A significant portion, if not all, of the savings should be returned to taxpayers in the form of education-oriented tax relief, such as an expansion of the higher education deduction.
New Entitlements
Almost half of the savings in the House bill will be used to reduce the interest rates on student loans. Under current law, the interest rate for both subsidized and non-subsidized student loans is 6.8 percent. Under the House bill, the rate for subsidized loans would gradually fall, reaching 3.4 percent in 2012. The problem is that after 2012, the interest rate returns to 6.8 percent. Obviously, this would create enormous pressure in 2013 to maintain the subsidized lower rates, but the House bill irresponsibly leaves this problem to future Congresses.
The other core federal support program for students in college is the Pell grant program. The House bill authorizes a significant increase in the maximum Pell grant award. The maximum award level for the Pell program for the 2007–2008 academic year is $4,300. The House bill authorizes a maximum award for the following year of $7,600, rising each year to reach $11,600 for 2012–2013.
Pell grants are given each year to millions of students to help defray the cost of higher education. The program and the provisional maximum grant award levels are authorized in legislation, such as H.R. 2669. Actual spending, however, is subject to annual appropriation, which means the amount spent must be appropriated by Congress each year in legislation signed by the President. Typically, the appropriations process lowers the maximum grant award level from that specified in the authorizing legislation, so the maximum awards specified in the authorization have little meaning.
The House legislation would also create nine new mandatory programs—or entitlements. These programs are called “mandatory” because they operate on autopilot, without annual appropriations; Congress does not even have to pass a budget for them. One of these programs is a new mandatory Pell grant add-on. That means Pell grants could be larger and the increases would come year after year without additional action by Congress.
If this new Pell grant add-on becomes law, the Pell program is likely, over time, to transform into a mandatory—or entitlement—program. History has shown that when Congress creates a new mandatory spending program, spending quickly grows out of control. One recent example is the State Children’s Health Insurance Program (SCHIP), the reauthorization of which Congress is now debating. SCHIP has already expanded well beyond the target population it was initially intended to cover (children ineligible for Medicare but without private coverage) and may, depending on the legislation passed this year, grow to cover a sizeable proportion of middle-class adults while doubling SCHIP costs. Growing on autopilot, federal entitlement spending—such as on Social Security, Medicare, Medicaid, and veterans health—is already soaring. Congress should not make matters worse by creating yet another exploding entitlement program.
New Unnecessary Subsidies
The House bill also goes off track by creating a new student loan forgiveness program for public-sector borrowers. Under the program, graduates with loans who go to work for the government in an approved job for a sufficient period would have a portion of their loans forgiven. When a portion of a loan is forgiven in this manner, that part of the loan becomes, in effect, a grant.
There is no reason to give public-sector workers a financial benefit unavailable to those who work in the private sector. Congress is already intent on increasing the size of grants to students. It should not explicitly discriminate against students who choose to work in the private sector.
Conclusion
The reauthorization of the federal higher education programs should be used as an opportunity to reprioritize and, where possible, reduce federal spending—not as an excuse to create still more programs. Having found a good place to cut spending, Congress should return most of the savings to taxpayers through education-oriented tax relief and direct the balance to the core federal higher education mission of helping students pay for college. Above all, Congress should not use the occasion of the higher education reauthorization to create new and ultimately unaffordable entitlement programs.
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