The College Aid Crisis

Almost two weeks ago, we posted an interview with Richard Kahlenburg of the Century Foundation who said that low income students were being kept out of college in large numbers because they couldn’t afford it and grant programs had been cut to the bone by a Federal govt that wasn’t interested and state govts that were already severely strapped by the Federal pull-out from its responsibilities. Today the NY Times editorial board weighed in.

Published: May 25, 2004

Nearly a half-million Americans will be turned away from four-year colleges this year for financial reasons, thanks to rising tuition costs and declining state and federal aid for low- and middle-income students. Congress should modify the federal college loan system to deal with this problem. A proposed bill would save billions of dollars that could then be redirected into grants for tuition aid.

Right now there are two basic college loan programs. The direct loan system, which actually makes a small profit, allows students to borrow from the government through their schools. Under the vastly more expensive Federal Family Education Loan Program, private banks receive federal subsidies to make government-backed student loans. Colleges can participate in only one of the two systems. In the 1990’s, Congress talked about phasing out the costly bank-based program and replacing it with the direct loan program. Such a step could save billions of dollars a year that could be directed into the federal Pell Grant program, which helps pay the college expenses of low-income students with outright grants. This common-sense plan was killed by the banking lobby, but it has returned in the form of a bipartisan House bill known as the Direct Loan Reward Act.

The bill would encourage the nation’s colleges to participate in the less expensive direct loan program by giving half of the savings to them in the form of Pell Grants for needy students. Backers of the loan reform bill say it could channel enough money into Pell Grants to increase the size of the awards by more than a third at some public colleges, raising the maximum grant to about $6,000 a year.

Supporters of the bill calculate that taxpayers may save more than $6 billion annually if all of the nation’s colleges and universities move to the direct loan program. But the money saved and the increase in Pell Grants would be substantial even if only a significant fraction of the nation’s colleges made the switch. That result alone makes this bill a good idea.

You can help by calling your Representative and demanding that s/he support the Direct Loan Reward Act for low income students. While you’re at it, the next time you go to your bank, take a few minutes to speak to a manager and tell them you don’t appreciate the bank’s lobbyists killing the first reform bill and that you’ll pull your account if they don’t support DLRA this time around. Remember: it’s your money, not theirs.

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