Peterson Supports Significant Increase in Financial Aid for Students and Their Families

Sep 7, 2007 Issues: Education

(Detroit Lakes, Minn) – Congressman Collin Peterson today voted for final passage of legislation to make the largest investment in college financial aid since the 1944 GI Bill. The College Cost Reduction and Access Act will help millions of students and families pay for college at no new cost to taxpayers. The bill now goes to the President’s desk for his signature.

“Improving financial aid is one of the more significant achievements of this Congress,” Peterson said. “I can’t think of a better way to help students and their families as they try to figure out how to pay for their education.”

The College Cost Reduction and Access Act would boost college financial aid by more than $20 billion over the next five years. The bill pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry by $20.9 billion. It also includes $750 million in federal budget deficit reduction.

Under the legislation, the maximum value of the Pell Grant scholarship would increase by $1,090 over the next five years, reaching $5,400 by 2012. This increase would fully restore the purchasing power of the scholarship, which in recent years had been frozen at $4,050 until Congress boosted its value to $4,310 earlier this year.

In Minnesota, more than 67,000 students take out need-based loans each year at 4-year public schools, and more than 76,000 students receive a Pell Grant.

To reduce the cost of loans for millions of student borrowers, the legislation would cut interest rates in half on need-based student loans, from 6.8 percent to 3.4 percent over the next four years. Once fully phased-in, this would save the typical student borrower – with $13,800 in need-based student loan debt – $4,400 over the life of the loan. About 6.8 million students take out need-based loans each year.

“High interest rates on student loans have been a problem for many who are trying to pay back them back. Cutting interest rates is a major move in the right direction and I think students will be very grateful for this change down the road,” Peterson said.

The legislation also would prevent student borrowers from facing unmanageable levels of federal student debt by guaranteeing that borrowers will never have to spend more than 15 percent of their yearly discretionary income on loan repayments and by allowing borrowers in economic hardship to have their loans forgiven after 25 years.

The College Cost Reduction and Access Act includes a number of other provisions that would ease the financial burden imposed on students and families by the cost of college, including:

Tuition assistance for excellent undergraduate students who agree to teach in the nation’s public schools; 
Loan forgiveness after 10 years of public service and loan repayment for college graduates that go into vital public service jobs; 
Landmark investments in Historically Black Colleges and Universities, Hispanic Serving Institutions and other minority serving institutions; and 
Strategies to help colleges contain costs and make online information on college costs for students and parents more user friendly. 
President Franklin Roosevelt signed the GI Bill into law in 1944. The original law enabled 7.8 million veterans of World War II to participate in education or job training programs.