House Republican leaders recently submitted a bill they claim is in the best interest of college students.
The College Access & Opportunity Act is supposed to expand access to higher education for millions of low- and middle-income students. It was introduced by Rep. John A. Boehner (R-Ohio), chairman of the Committee on Education and the Workforce, and Howard P. "Buck" McKeon (R-Calif.), as part of the effort to reauthorize the Higher Education Act, which governs the federal student loan program.
Well, I've had a chance to look at the proposed legislation and, in a nod to Roger Ebert and Richard Roeper, my two favorite movie critics, here are my two thumbs up or down on various provisions of the bill:
* Thumbs down (way down) for a move that would change from fixed to variable the interest rate for consolidation loans. This is probably the most controversial issue in the bill. Anyone who has taken out student loans should be paying attention to this proposal. Right now, student borrowers can bundle their various loans into one low, fixed-rate loan that can be stretched out as long as 30 years. But we all know that interest rates are not likely to stay as low as they have been recently. If the provision passes and the loan rate is changed to variable, a lot of people will pay thousands of dollars more on their consolidated student loans.
* Thumbs up for a proposal to increase loan limits for students in their first and second years. First-year student limits would increase from $2,625 to $3,500. Second-year student limits would increase from $3,500 to $4,500. However, the total an undergraduate could borrow would remain unchanged at $23,000. Some think the aggregate loan limits should be higher. I'm not in that camp. Students are already saddled with an amazing amount of debt. I don't think the government should be pushing the loan limit any higher. The answer to rising tuition costs isn't in giving people the ability to borrow more. Instead, we should be exploring ways to make college more affordable.
* Thumbs down for not significantly increasing Pell grants, which are need-based assistance given to low-income undergraduates and certain postgraduate students. This bill would cap the current maximum Pell grant at $5,800 through 2011. As Rep. George Miller(D-Calif.), the ranking minority member on the House Education and the Workforce Committee, points out, last year's maximum Pell grant award was worth $500 less in real terms than the maximum award in 1976-77. By the mid-1990s, the maximum Pell grant (currently $4,050) paid for only about 34 percent of the average cost of college (tuition, fees, room and board) at a public four-year college, compared with 84 percent in the mid-1970s, according to a report by the Institute for Higher Education Policy and Scholarship America. It's vital that we increase the pot for Pell grants. If we don't, soon only children of the rich will be able to afford a college education.
* Thumbs up for proposing a year-round Pell grant to help some students who want to accelerate their course-taking.
* Thumbs up for a call to repeal the anti-competitive "single-holder" rule, which requires student borrowers who have all of their loans held by a single lender to consolidate with that lender, even if they could obtain better terms and service elsewhere. Repealing the requirement would allow borrowers to shop around for the best loan terms and services.
* Thumbs up for a plan to eventually reduce student-loan origination fees to 1 percent.
* Thumbs up for a provision that would require lenders to report to all the major credit bureaus the payment histories of their borrowers. Sallie Mae, the nation's leading provider of educational loans, received a lot of criticism (and rightfully so) because it decided, without telling its more than 7 million borrowers, that it would report loan-repayment information only to Innovis Data Solutions, a small credit bureau, and to Equifax, one of the big three. Critics accused Sallie Mae of trying to hide its borrowers from competitors. In response to mounting criticism and threats of legislative action by Senate leaders, Sallie Mae reversed its policy and has now resumed reporting the repayment history of its borrowers to Experian and TransUnion, the other two major credit bureaus. No federal law requires reporting to all the major credit bureaus. Until there is, hundreds of other lenders could be harming the credit ratings of borrowers because their positive payment histories are not being reported.
* Thumbs up for a provision that would put the spotlight on institutions that increase tuition and fees at more than twice the rate of inflation over a three-year period.
Overall, there are some good proposals in this bill, but it shouldn't be passed as is because there are enough provisions that either don't do enough for students and graduates or increase their costs.
Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org. Readers can write to her in care of The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or by e-mail at firstname.lastname@example.org.