WASHINGTON D.C. - As the Senate prepares to debate final steps for passing historic health reform, U.S. Sen. Sherrod Brown (D-OH) today detailed how the package also represents the largest federal expansion of student aid in our nation's history - legislation which would help more students afford college, keep jobs in the U.S., and promote economic competiveness - all at no additional cost to U.S. taxpayers.
"This is a victory for college students and middle class families," Brown said. "For too long, our country has paid private lenders to make loans that the federal government can and does make directly for less money. This makes no sense to middle class families struggling to provide a college education for their children. By redirecting these funds, this bill is good for taxpayers and good for our economic competitiveness."
New legislation would enable the maximum Pell grant award to reach a historic high of $5,550 for the next academic year grow with inflation to nearly $6000 in the years ahead - helping more students meet the rising cost of a college education. The bill would also help make federal student loans more manageable to repay by strengthening an Income-Based Repayment program that currently allows borrowers to cap their monthly federal student loan payments at just 15 percent of their discretionary income. These new provisions would lower this monthly cap to just 10 percent for new borrowers after 2014.
There would be an estimated $1.2 billion additional in Pell grants for Ohio students over the next 10 years. Sen. Brown today released a regional analysis of Pell grant funding for Ohio. There would also be an additional $13 million to support Ohio's Historically Black Colleges and Universities along with approximately $22 million to continue the state's College Access Challenge Grant to promote college-readiness for low-income students.
This legislation would eliminate wasteful subsidies to banks in the federal student loan programs, and instead finance all federal student loans directly through the government - generating $61 billion in savings over 10 years, according to the Congressional Budget Office, that would be used to boost Pell Grant scholarships. These changes would make student loans more manageable for borrowers to repay, and bolster community colleges' attendance.
The federal government currently funds 88 percent of all federal student loans, whether they are loans lent to students directly through the government or emergency aid programs student lenders have relied on since the credit crisis in 2008.
Passed by the House and Senate budget committees last year, the budget resolution instructed Congress to use reconciliation to pass health insurance and student loan reforms that would reduce the deficit by $1 billion over five years. The reconciliation being debated in the Senate is fully paid for and reduces the deficit by at least $10 billion over 10 years.
Specifically these provisions would:
- Make College More Affordable - A total of $36 billion would be invested into the Pell Grant program over 10 years, including $22.6 billion to increase the maximum Pell Grant award to adjust for inflation ensuring that millions of college students would have access to student aid.
- Protect Students' Pell Grant Scholarships - As the Pell Grant program faces increased costs due to higher demand, the maximum award could decrease to $2,150 from its current value of $5,350. By directing $13.5 billion of the $36 billion Pell Grant investment to address the potential gap, drastic cuts in Pell grant funding would be avoided.
- Maintain American Jobs - Lenders would compete for contracts to service all federal student loans, which would guarantee borrowers high-quality customer service and safeguard jobs while preserving a private industry presence. Unlike loans made by banks, Direct Loans can only be serviced by workers in the U.S.
- Invest in Historically Black Colleges and Universities and Minority-Serving Institutions - Recognizing the important role that minority-serving institutions play in educating our country's low-income and minority students, these provisions would invest more than $2.5 billion for Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other minority-serving institutions.
- Make Federal Student Loans More Manageable - These provisions would allow borrowers to cap their monthly loan payments at 15 percent of their discretionary income, easing the burden of repaying the loan. This Income-Based Repayment program would lower the monthly cap to 10 percent for new borrowers after 2014.
- Help Students Achieve a Degree - The College Access Challenge Grant (CACG) program would invest $750 million for states to organize services to promote college readiness for low-income students who are prepared to enter and succeed in college and manage their student loans.
- Prepare Students for 21st Century Workforce - The provisions would invest $2 billion for community colleges to develop and improve educational or career training programs.
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