March 18, 2010
Harkin: Education Reconciliation Measure Increases College Affordability
Measure eliminates subsidies to lenders, invests in students and families
WASHINGTON, D.C. – Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions Committee, today unveiled landmark legislation to make college more affordable and accessible. The measure eliminates billions of dollars in wasteful subsidies to banks and redirects that money to students and families in the form of increased Pell Grants to low-income college students, one of President Obama’s key education priorities.
The bill is part of the reconciliation package that will be used to provide technical fixes to health reform. That package is expected to be considered by the U.S. House later this week before heading to the U.S. Senate for consideration.
“Education is the key to success in this country. It has the ability to transform a young person’s life and give them opportunities above and beyond the generations before them. But as millions of Americans struggle to afford the costs of higher education, multi-billion-dollar, taxpayer financed subsidies continue to flow to private banks,” said Harkin. “As Americans tighten their belts and make smart choices with their money, Congress should too. We cannot continue this blatant corporate welfare.
“Our bill redirects that funding to students and families, making college more affordable and ensuring that more Americans have access to higher education and the skills to succeed in the 21st Century economy.”
“This is really about making a simple choice. Congress can either continue this boondoggle that rewards banks with tens of billions of subsidies at the expense of families and taxpayers – or we can invest that money directly in students,” said Congressman George Miller. “These provisions will help make college more affordable at a time when our economy demands more college graduates. This bill is a smarter choice for our economy, a more responsible choice for our taxpayers, and a moral choice as millions of students and families struggle to pay for college.”
Currently, the federal student loan program provides subsidies to banks to make student loans, or makes them directly to students at a much reduced cost to the government. The education reconciliation bill saves $61 billion over the next ten years by ending the subsidies to banks, and reinvests most of that savings into Pell Grants. It also preserves a role for non-profit lenders to service student loans and continue their student outreach and support activities.
Specifically, the education reconciliation measure will:
Provide increases in the maximum Pell Grant award to keep up with inflation. The bill increases the maximum award to $5,550 next year and to almost $6,000 by 2017, by indexing the award to the Consumer Price Index starting in 2013 to match rising costs-of-living. The Bureau of Labor Statistics projects that by the year 2018 nearly 75 percent of all new jobs will require at least an associate’s degree. In the 2008-2009 award year, 6.2 million Americans relied on Pell Grants to help pay for college and career training. Eighty-nine percent of those students came from families making less than $40,000. A strong Pell Grant program is essential to help a new generation of Americans enter college or workers return for training to gain the education and skills needed for jobs in the 21st century economy.
Make college more affordable and accessible. Under the current maximum award, 8.7 million students would receive Pell Grants in 2011-2012. If the FY 2011 Pell Grant program shortfall of over $19 billion is not addressed, the maximum award could decrease to $2,150 and nearly 600,000 students could lose the benefit entirely. The education reconciliation bill offers an opportunity to put Pell grants on a more solid footing by addressing most of the FY 2011 Pell Grant shortfall. Shoring up the program by passing the education reconciliation measure would help Congress avoid massive cuts to education and other critical domestic spending priorities.
Reduce the deficit. This bill provides more than $10 billion in deficit reduction to exceed the reconciliation instruction issued to the HELP Committee.
Provide funding for Minority-serving Institutions. The bill continues funding provided in the 2007 education reconciliation bill for Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other MSIs. It provides $2.5 billion to support the critical role these institutions play in educating our country’s low-income and minority students.
Support non-profit lenders. The bill entitles qualified non-profit lenders to service Direct Loans and provides about $1.5 billion in additional funding to pay for these efforts. The bill also more than doubles the 2007 reconciliation bill’s investment in the College Access Challenge Grant program. These formula grants to states help organizations provide services that increase the number of low-income students who are prepared to enter and succeed in college and manage their student loans, such as financial literacy and debt management skills.
Make Loan Repayment More Manageable. Starting in 2014, the bill lowers the burden of student debt by capping a new borrower’s loan payment at 10 percent of their net income, after adjustments for basic living costs, and forgiving any remaining debt after 20 years.
For a Myth/Fact document on the legislation, click here: http://harkin.senate.gov/documents/pdf/4ba24139781c1.pdf