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WHITE HOUSE DROPS PLAN TO RAISE COLLEGE LOAN COSTS

Last week, the White House proposed a plan to cover the $1.3 billion Pell Grant shortfall by consolidating student loans at variable interest rates, rather than the low, federally subsidized, fixed interest rate currently in place. Such a change would make loans less attractive to borrowers and save the government about $1.3 billion. The proposal was dropped after widespread opposition from students and most members of Congress who argued that doing away with fixed-rate loans would penalize poor and middle-income students who depend on low-interest-rate loans to pay college expenses. The House of Representatives has agreed to include $1.3 billion to cover the shortfall in the spring supplemental spending bill.

Reacting to the Administration’s proposal to raise interest on student loans, Sen. Ted Kennedy (D-MA) and Rep. George Miller (D-CA) held a press conference and released a report detailing the impact of education budget cuts on college enrollment. They argued that state budget shortfalls and the President’s education budget request will lead to increased college tuition costs and loan debt and effectively limit college access for low- and middle-income students.

Nearly every state is legally required to balance its budget. And because education is more than one-third of a state’s budget it is a likely target for savings in tough economic times. When state higher-education budgets are reduced, students see the results in tuition increases at State colleges and universities. In addition to the President’s newest proposal that would have increased the cost of student loans, the President’s budget would result in at least a $100 reduction in federal college grants for students in the lowest income bracket, according to the Congressional Budget Office.

Sen. Kennedy and Rep. Miller were joined at the press conference by Sens. Joe Biden (D-DE)Hillary Clinton (D-NY)Patty Murray (D-WA),Jack Reed (D-RI), and Paul Wellstone (D-MN), along with a science teacher from Harrisburg, Pa., and a college student from Washington state. The undergraduate talked about her struggle to balance her dream of becoming a teacher with the reality of managing an increasing student loan debt that will be difficult to pay back on a teacher’s salary.

The report is available on the House Democrats’ Education and the Workforce Web site.

Pell Grants Open Doors to College

 

Pell Grants are college scholarships for low-income students and are the foundation of federal efforts to ensure that all qualified Americans can attend college. Because the grant program is a “quasi-entitlement,” Congress must appropriate enough funds to pay for all eligible students who apply. During an economic downturn, more people decide to go back to college and more qualify for need-based financial aid. In the 2001 academic year, an unprecedented 9.3 million students applied for a Pell Grant, which led to the $1.3 billion shortfall in the amount of funds available.

 

First Spending Bill Price Tag Set at $27 Billion

Congress is poised to act on a spring supplemental bill spending request by President Bush that includes over $27 billion and would largely fund defense ($14 billion), homeland security ($5 billion) and aid for New York City ($5 billion). Last week, Republican and Democratic appropriators in the House of Representatives struck a deal to add about $3 billion to the President’s request. The additional funds included $1.3 billion for the Pell Grant shortfall and more money for homeland security.

Now that the student loan interest rate proposal has been dropped as a way to pay for the Pell Grant shortfall, this spring supplemental is the most attractive vehicle for allocating the $1.3 billion needed. Despite agreement in the House to include the Pell Grant shortfall, neither President Bush nor the Senate have agreed to the additional spending.

Complete list of items included in and being considered for the spring supplemental.

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