Article

Dealing with Debt

New Legislation Could Help Millions of Students

Skyrocketing tuition costs and uncontrolled interest rates overburden college students. Before the school year starts, Congress can help.

See how much the College Cost Reduction Act will affect you. Hover over the map below to see Congressional Research Service projections for total aid, the number of students benefited, and the average savings per student in each state. You can see how congressmen in each state voted on the House Bill, the College Cost Reduction Act (H.R. 2669) by following the links.

 

Students rang the bell, and Congress is answering. As colleges spend the summer preparing to open their doors for the new academic year, the House of Representatives passed the College Cost Reduction Act. “Debt Hits Hard,” a Campus Progress project, campaigned hard for bold federal action, and the proposed legislation, accordingly, hopes to reduce the ever-growing burden on America’s youth—college debt. Now it’s time for the Senate to match the House’s effort and start helping students deal with debt.

The bill, H.R. 2669, comes at a time when students need it the most. College costs have grown nearly 40 percent in the past five years, and 60 percent of all college graduates leave college with debt. Between 2001 and 2010, 2 million academically qualified students will not go to college because they cannot afford it. Such substantial cost and debt drains our economy and saps from our competitiveness in a globalizing market in addition to holding back some of our best and brightest students.

The Pell Grant system was supposed to help students through college, but the system is currently in disarray. In 1976, Pell Grants could cover up to 72 percent of the cost to attend a public four-year university; now the maximum grant only covers 41 percent. That leaves students with less support and more debt. Even worse, that debt translates into high interest payments to third-party lenders that prey on students. The government subsidizes these lenders, hoping to cut down costs, but commercial banks actually turn a substantial profit off the college loans, pocketing the handouts.

Now the College Cost Reduction Act promises to do something about it by:

  • Cutting interest rates in half over the next five years.
  • Raising the maximum Pell Grant by at least $500 over the next five years to $5200.
  • Providing tuition assistance to undergraduates who commit to teaching in high-need public schools.
  • Limiting the amount that borrowers have to pay to 15 percent of their discretionary income and allowing for loan forgiveness in the event of economic hardship and after 20 years of payments.

All these reforms add up to the single largest investment in higher education since the GI Bill. Surprisingly, this legislation is as bold as it is practical. By cutting excess subsidies, the federal government can open new doors to college at no new cost to the taxpayer. That’s an investment with infinite dividends.

Before the school bell rings this fall, the federal government should commit to the goals of the College Cost Reduction Act. They have no excuse not to.

 

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