Bush Signs Sweeping Student Loan Bill Into Law, Adding an Asterisk
Friday, September 28, 2007
President Bush signed into law yesterday a student loan bill that will provide more than $20 billion in federal aid to college students and is being likened to the G.I. Bill, which helped millions of World War II veterans attend college.
The law, which received overwhelming bipartisan support in Congress, will slash federal subsidies to private loan companies and increase grants for students. It will gradually reduce interest rates on federally subsidized loans for low-income students to 3.4 percent over five years. The law will also offer loan forgiveness for those who have held public service jobs for 10 years and will cap payments on federal loans at a certain percentage of a college graduate's income.
The new law, the College Cost Reduction and Access Act, overhauls the nation's student loan system. Recent investigations have revealed how lenders have showered university officials with gifts to woo student borrowers and drive up profits. Congress reacted sharply to the disclosures, and the support to revamp the student loan industry was considered a rare bipartisan endeavor.
The House of Representatives approved the law 292 to 97; the Senate vote was 79 to 12. Only Republicans voted against it.
"This bill will help ensure that no qualified student is prevented from going to college because of the cost," said Rep. George Miller (D-Calif.), the House education committee chairman. He said he is proud that Congress has "provided the greatest investment to help students and parents pay for college since the G.I. Bill and has delivered on our promise to make college more affordable and accessible for families."
But as Bush signed the bill, he suggested that it is not perfect. "This bill makes some spending commitments that aren't paid for yet, and I look forward to working with the Congress to ensure Pell Grant increases that are not fully funded in this bill are paid for with offsets in other areas."
Lending industry advocates, who have been railing against the reforms since they were proposed, said Bush's signature will only hurt students and the lending companies. Kevin Bruns, executive director of America's Student Loan Providers, said the new law will take away 80 percent of the companies' federal subsidies over the next five years, which could result in fewer loan benefits for students.
Bruns said that about 3.5 million middle-class student borrowers might face a new reality in which lenders can no longer offer them interest-rate reductions for timely payments. "This bill is wiping out the profit margin for even the largest lenders," Bruns said. "How can you run a lender-based program if you're not allowed to earn a reasonable profit margin?"
Student advocates dismissed those criticisms. Luke Swarthout, a higher education advocate with the U.S. Public Interest Research Group, said the backlash reflects complaints from one of the country's "more excessively subsidized industries." Two of the student-friendly parts of the bill, he said, are the increase in annual federal Pell Grants, which will shoot up to $4,800 next year, and the income-based payment cap.
"The program will stop people from making unmanageable payments," he said. "The concept is that no matter what job you take, your income is protected."
Barry Toiv, spokesman for the Association of American Universities, said the increase in Pell Grants is a victory for students, because the new law guarantees that the grants will reach a value of $5,400 a year by 2012 .
"The Pell Grant has not been close to keeping with the need out there with potential students," Toiv said. He said he is unsure whether lending companies will be crippled by the measures. "We think this is an important step in the right direction. I think we'll just have to see what the impact is. It's hard for us to know."