As the college tuition continues its meteoric rise, secondary education seem to become a pipedream for many. The Democrats in Congress however are trying to put their money where their mouths are, trying to make college more affordable for all.
Just last month the House and Senate passed similar versions of the College Cost Reduction Act, which pill reduce in half the interest for the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs. The legislation however plans to fun the subsidization by cutting $18 billion from federal subsidies to student lenders.
The Democratic Representative George Miller of California, chairman of the House Education and Labor Committee and author of the legislation states that the bill is a remarkable step towards a future where “every qualified student” would go to college. He adds that this bill will enable everyone the opportunity, and not be weighed down by 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.
White House opposition
Following the College Cost Reduction Act (provided President Bush does sign it), the interest rates for federal loans would plummet 6.8 percent to 3.4 percent in July 2012. Pell Grants; the 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. $85 billion in federal and private loans were taken by the students alone last year, to pay for college. The White House however has threatened to veto the legislation, saying it would not benefit the poorest students greatly while simultaneously creating costly new programs. The program is useless as it would only benefit students who had left school, which becomes redundant as there are flexible repayment options for them available under current law, according to a statement from the White House.
Lax oversight of loan program
An August government report had gone on to criticize the Department of Education for failing to regulate a proper system made for detecting misdemeanors by lenders while protecting the student lenders. The Government Accountability Office noted that moneylenders were giving inappropriate incentives to colleges to steer the student towards them. The burgeoning relationships 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. It is noted that in 20 years the department the Attorney General Andrew Cuomo had tried only two lenders for violating government rules. The Attorney General in New York, Missouri, Illinois, California, Connecticut, Minnesota and Ohio announced earlier this year that they have the current student lending practices under investigation. A bill had also been passed by the Senate last month restricting at least some of the practices uncovered by the investigations, helping to simplify the loan application process according to Reuters.
Students call for more protection
Student activists rally together, asking for more actions to be taken. Alan Collinge, a 1999 college graduate, told 60 Minutes that his student debt skyrocketed from $45,000 to $103,000 because he could not make the payments. He started studentloanjustice.org in 2005 to raise awareness. Sallie Mae, a private school lender, had allowed him to develop this debt, because a loophole in the law allowed private student loan lenders to be treated differently from any other type of U.S. Capitol lender.
While the bills presented before the Congress maybe a step forward for the college students, they do scant about the lenders, says Collinge. "The decrease in interest rates is significant but neither of the bills do anything to restore standard consumer protections to student loans," he said. Under the current conditions, people with student loans still have to repay even if they declare bankruptcy, the students aren't protected from exorbitant interest rates either. "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," Collinge noted. What steps would the Congress take to alleviate this? Time will tell.