Guide to Education Grants

The big news this week is what the democrats are doing in
congress with respect to student loans and college funding, with the convening
of the 110th Congress. As I mentioned in earlier posts, a new piece
of legislation is being introduced as part of the College Student Relief Act of
2007 regarding federally subsidized student loans. The legislation, H.R. 5,
which proposes to reduce the interest rate by 50 percent, from 6.8 percent to
3.4 percent, will be voted on beginning Jan. 17, 2007. According to the article, “Democrats Plan Evolves (and Narrows)” by Doug Lederman that appeared in Inside Higher Ed on Jan. 5, 2007, the
legislation will also include raising the Pell Grant incrementally over several
years (up to a maximum of $5,800) and make the tax deduction for middle income
students and their families permanent. While the interest rate reduction was
the first agenda item, many borrowers are eagerly waiting for congress to
address such items as the Pell Grant increase and tax deductions.

Costs Questioned

The original cost estimates for the entire proposal ranged “anywhere
from $50 to $100 billion, leading to serious questions about where they’d find
the money to pay for it” Lederman reports. He states that the legislators now
appear to be pursuing a more realistic “agenda for what they hope to do for
students, at least in the short term.” Borrowers will save and benefit, as I
mentioned on Monday. ‘“Once fully implemented, these cuts will save the typical
borrower – with $13,800 in need-based loan debt – approximately $4,400 in
interest costs over the life of his or her loan,’ the Democrats’ news release
said,” as reported by Lederman.

Newly updated costs estimate for the interest rate reduction
cut “would cost an estimated $6 billion over five years” Lederman states. That
figure is down significantly from original estimates of $18 to $30 billion in
previous editions of the plan. Lederman also reports that “some of that
reduction has been achieved by phasing the cut in over five years (rather than
making it immediately), limiting the reduction to subsidized Stafford
loans (as opposed to Perkins and parental loans) and undergraduates, and by
excluding consolidated loans.”

Reviews Mixed

Many advocates for students are excited with the direction
that congress is moving, the article states. According to the author, “the U.S.
PIRG’s Higher Education Project trumpets the benefits for borrowers as a
significant step toward attacking the problem of mounting student debt.”
College lobbyists are also happy, as congress appears to be placing the student
loan agenda on their priority list. On the other hand, many college officials
are “worried that the plan might end up helping even fewer students” as mentioned
in the article. However, a recent “news release from House Democrats sought to
provide reassurance that the interest-rate cut, if narrower than originally
promised, was just the beginning of their efforts to help students” the article
reports.

Only time will tell if the democrats keep their promises and
to what extent student borrowers and their parents benefit with the
implementation of the new legislation.

It is important to keep up to date on the effects of the
legislation and news on student loans and education. What goes on in government
and in your state can have a great impact on your student loans and your
college education.

For all the information you need about student loans, go to www.nextstudent.com.

Be sure to tune in next Wednesday for my next blog on
student loan legislation in the news.Student Loan Girl

This entry was posted on Friday, January 12th, 2007 at 1:02 pm and is filed under Education Funding News, Student Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.