Cost Reduction Act awaiting Bush approval

Whitney Lawrence
City Times

The College Cost Reduction Act, passed by the Senate and the House of Representatives on Sept. 7, calls for an increase in Pell Grant scholarship awards, reduction of student loan interest rates, and a simplified college financial aid process. The act is now pending presidential approval and if passed will take immediate affect on college students across the United States.

“That’s my understanding,” said Gregory Sanchez, City College’s financial aid Director, “is that the President will sign it. There were enough changes in it to meet his approval.”

After Congress presented the bill to the president on Sept. 20, Congressman George Miller of California, who sponsored the bill, stated with confidence during a teleconference that “the bill will be passed in the next few days.”

An increase in Pell Grant awards is among the top priorities of the act. According to the U.S. Department of Education, college students are awarded Pell Grants based on their Estimated Family Contribution, or EFC, and are not required to pay them back. The proposed bill will raise the maximum Pell Grant award from $4,310 to $4,800 in the 2008-09 school year and peak at $5,400 by 2013.

“It’s huge,” Sanchez said of the bill. “I’m pleased with the increase. The more Pell Grants (students) can get the fewer loans they have to borrow. It’s a real benefit.”

Another asset to the College Cost Reduction Act is called Tuition Sensitivity. San Diego City College students pay $20 per unit, among the lowest in the nation for college tuition. One drawback to the low fees is that City College students are not getting the maximum Pell Grant awards. With Tuition Sensitivity, the government will no longer use tuition cost as a factor, giving City College students the best of both worlds – low tuition and high scholarship awards.

Upon approval, Sanchez says the College Cost Reduction Act will have immediate effect on City College students, as well as college students around the country. Since the bill is retroactive to July 1, students who are eligible to more money under the Cost Reduction Act will receive the difference at a later date yet to be determined.

The bill also states that student loan interest rates will be taking a dive. The interest rates of subsidized student loans (those in which the U.S. Department of Education covers interest while the student is enrolled in college at least half time) are currently 6.8 percent. In the 2008-09 school year, the College Cost Reduction Act will drop interest rates to 6.12 percent and will keep falling until 2012 when it reaches 3.4 percent. In essence, interest paid on these loans will be halved, a student who borrows $10,000 in subsidized loans will pay $340 in interest instead of $680 at the current rate.

The Direct Loan program helps keep City College graduates from defaulting (failing to pay) on their loan payback. Since switching to the Direct Loan program 10 years ago, City College’s default rate went from 25 percent to 10.6 percent.

“We’re very pleased,” Sanchez explains. “We’ve had a steady decrease over the past 10 years.”

The College Cost Reduction Act of 2007 will further help students from going into default on their loans by “making student loan payments more manageable for borrowers by guaranteeing that borrowers will not have to pay more than 15 percent of their discretionary income in loan repayments, and allowing borrowers in economic hardship to have their loans forgiven after 20 years,” the House Education and Labor Committee reports.

According to the Committee on Education and Labor, the College Cost Reduction Act “will do more to help students and families pay for college than any federal effort since the 1944 GI Bill.”

Introduced in 1944, the GI Bill is credited for changing the face of higher education and improving the U.S. economy.

About 33 percent of City College students receive some sort of financial aid, and Sanchez says he suspects more are eligible.

“The main thing is that students should just apply . just complete the FAFSA, the Free Application for Student Aid, and submit it,” Sanchez said. “It doesn’t cost you anything but a postage stamp and if you do it online it doesn’t cost you anything . and just see what happens. You might be eligible for a Board of Governors Fee Waiver, a Pell Grant, or other types of aid.”

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Cost Reduction Act awaiting Bush approval