Washington, DC (June 13, 2007) – Congressman Rubén Hinojosa (D-TX), chair of the Subcommittee on Higher Education, applauded the Education and Labor Committee’s approval of legislation today that will reduce the cost of college and increase the federal government’s investment in Minority Serving Institutions. The bill would make the single largest investment in college financial aid since the 1944 GI Bill, helping millions of students and families pay for college – and doing so at no new cost to U.S. taxpayers.
The College Cost Reduction Act of 2007, which the Committee overwhelmingly approved by a vote of 30 to 16, would boost college financial aid by about $18.25 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. It also includes $750 million in federal budget deficit reduction.
“This legislation will increase student financial aid by a magnitude we have not seen in more than a generation,” said Hinojosa. “It invests in our public servants and in our teachers. It brings the private sector and charitable organizations to the table and leverages our resources so that more first-generation, low-income college students can realize their full potential.”
In addition, the College Reduction Act contains a provision that will commit $500 million over five years to Minority Serving Institutions, including Hispanic Serving Institutions, Historically Black Colleges and Universities, and Tribally Controlled Colleges and Universities. This commitment represents a doubling of the current investment.
“This is truly a historic initiative,” said Hinojosa. “Close to half of our public school children are racial or ethnic minorities – one in five is Hispanic,” noted Hinojosa. “It is clear that Minority Serving Institutions will only grow in importance and this investment will benefit our nation for generations to come.”
Under the legislation, 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, thus restoring the Pell’s purchasing power. Over 6 million low- and moderate-income students would benefit from this increase.
The legislation also cuts interest rates in half on need-based student loans, reducing the cost of those loans for millions of student borrowers. Like 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. About 6.8 million students take out need-based loans each year.
The legislation would also prevent student borrowers from facing unmanageable levels of federal student debt by guaranteeing that borrowers will never have to spend more than 15 percent of their yearly discretionary income on loan repayments and by allowing borrowers in economic hardship to have their loans forgiven after 20 years.
“Let us not forget that in 2003 more than 170,000 low-income, college-qualified students did not enroll in college because of financial barriers,” said Hinojosa. “This legislation puts us closer toward our goal of providing more Americans with the opportunity to go to college. As Chairman of the Subcommittee on Higher Education, I am committed to addressing the gaps in access and affordability that still remain.”