The legislation, the College Cost Reduction Act of 2007, HR 2669, which the House passed by a vote of 273-149, would boost college financial aid by about $18 billion over the next five years. The legislation pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry by $19 billion.
"This legislation will make college more affordable for millions of students. It is a historic step in expanding access to a college education for millions of Americans," Rep. McNerney said. "Having an educated workforce is fundamental to ensuring our nation's continued economic leadership in the world."
Under the bill, the maximum value of the Pell Grant scholarship would increase by $500 over the next five years. When combined with other Pell scholarship increases passed or proposed by Congress this year, the maximum Pell Grant would reach $4,900 in 2008 and $5,200 in 2011, up from $4,050 in 2006. About 6 million low- and moderate-income students would benefit from this increase.
The legislation would cut interest rates in half on need-based student loans, reducing the cost of those loans for millions of student borrowers. Like the legislation passed by the House earlier this year, the College Cost Reduction Act would cut interest rates from 6.8 percent to 3.4 percent in equal steps over the next five 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.
The legislation would also prevent student borrowers from facing unmanageable levels of federal student debt by guaranteeing that borrowers will never need to spend more than 15 percent of their yearly discretionary income on loan repayments and by forgiving loans after 20 years to those in economic hardship.
Additionally, the bill makes a $500 million investment in Hispanic Serving Institutions such as San Joaquin Delta College, along with historically black colleges and universities and other minority serving institutions.
The College Cost Reduction 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 for college graduates that go into public service professions.
• Increased federal loan limits so that students won't have to rely as heavily on costlier private loans.