“The College Cost Reduction and Access Act is the most
meaningful higher education reform in more than 15 years. The legislation addresses the dual financial
challenges of access and affordability that face American college
students. The legislation provides
billions of dollars a year in additional grant aid to low-income students
through the Pell Grant program. It will
also help students address the burden of rising student debt through lower
interest rates and a new repayment system.
This legislation is an example of Congress getting policy
making right. The bill trims excessive
subsidies that benefit a handful of banks and directs them to millions of
students and families who are working to pay for college. The bipartisan votes for this legislation,
and the president’s pledge to sign it into law, are testament to the broad
support for helping students and families pay for college.”
The College Cost Reduction and Access Act will:
- • Increase
the maximum Pell Grant award by $490 for each of the next two school
years, by $690 for the following two school years and by $1,090 for each
following year. The Pell Grant is
the nation’s premier college access program, providing grants to 5 million
low-income students each year. The
maximum Pell Grant is currently $4,310.
- • Create
an Income Based Repayment program that allows borrowers to repay their
loans as percentage of their income.
Borrowers would be expected to pay 15 percent of any income above 150 percent of
the poverty line (about $15,000 for a single individual). This new program will protect borrowers
with low salaries having to make unmanageable payments. As a result students will be able to
make employment and life decisions based on their values rather than the
volume of their debt.
- • Reduce
interest rates on student loans for more than 5 million low and
middle-income student borrowers receiving subsidized Stafford
loans. To see how many students
would benefit from these interest rate reductions read WISPIRG’s report, “Cutting Interest Rates, Lowering Student Debt.” (Note: this report
does not describe the interest rate reduction used in the final College
Cost Reduction Act)
- • Finance
increased education spending by reducing subsidies to student
lenders. Lenders will receive a
reduced rate of return for offering federal student loans and a slightly
reduced reinsurance rate from the federal government. As a result, the increased grant aid and
loan benefits will have no additional cost to taxpayers.
