Bush raises federal student aid

Elysia Glover Guest Writer

In an act heralded as the largest increase in federal student aid since the 1944 G.I. Bill, Congress approved increases in government subsidized aid maximums and halved interest rates on government student loans on Sept. 7.

The Bush administration previously issued two statements threatening to veto the first draft of the bill. Bush cited concerns over an excess of programs and an initial failure to increase Pell Grant funding to an acceptable level.

Many attribute Bush’s turnaround to Secretary for Education Margaret Spellings, who urged Bush to sign the bill because it “answered the president’s call to significantly increase funding” of Pell grants for low-income students. Bush then retracted his earlier threats, saying that Congress had met his demand with changes made to the compromise bill, which passed 79 to 12 in the Senate and 292 to 97 in the House of Representatives.

The compromise bill dramatically cuts back government subsidies currently given to student-loan companies. The federal government originally established these subsidies to ensure that lenders would enter and remain in the college loan industry.

The bill allocates $750 million has to reducing the federal deficit. The remainder will be spent on increasing the maximum Pell Grant. This should halve the interest rate on federally subsidized student loans from 6.8 percent to 3.4 percent over the next four years. Lawmakers also raised the maximum Pell Grant to $5,400 over a period of five years from the current $4,310, matching what Bush outlined in his budget.

The bill originally proposed 10 new entitlement programs; in the compromise bill, this was scaled back to four. Entitlement programs, such as food stamps, provide funding to individuals who meet a certain legal criteria. The bill also outlines a loan-forgiveness program for college graduates committing to 10 years of employment in the public service sector—positions such as teaching or nursing—and a cap on annual payments for students based on a percentage of their income. This, lawmakers argue, will help prevent individuals from having to pay back more than they can afford.

These changes carry a $21 billion dollar price tag, $3 billion more than initially proposed by Congress.