“Since Democrats regained control of the House in 2006, the Democratic Congress has made historic investments to make college more affordable -- all at no new cost to taxpayers. This has been and continues to be a top priority because it is unacceptable for a student to be forced to mortgage their future to pay for college. In this session of Congress alone, we’ve made major strides: first, the Democratic Congress increased the maximum Pell Grant award in the Recovery Act, then we took action to finally stop wasting tens of billions of dollars in taxpayer subsidies paid to banks to make federal student loans, and instead invested those dollars directly in students and families working very hard to pay for college.

“Year after year, the College Board report shows us that the work we’re doing is making a difference for students and families, especially in this economy. With more and more students relying on the Pell Grant scholarship, it is clear from this report that we must continue our efforts. This report proves that despite Republican opposition, the accomplishments of this Democratic Congress on behalf of students and families are working.”


BACKGROUND INFROMATION:

Miller is the author of the Student Aid and Fiscal Responsibility Act, legislation that was passed as part of the historic health care reform bill. The law invested over $60 billion in college aid at no new cost to taxpayers by converting all new federal student lending to the stable, effective and cost-efficient Direct Loan program.

For the current academic year, the Pell Grant scholarship increased to $5,550, and beginning in 2013 the maximum scholarship will increase with the cost of inflation by linking the scholarship to the Consumer Price Index.

In the previous sessions of Congress, Miller authored several additional laws that made college more affordable. These laws lowered interest rates on need-based Federal student loans, made federal student loan repayment more manageable by establishing an Income-Based Repayment program that allows borrowers to cap their monthly loan payment amounts, strengthened consumer protections for borrowers of both federal and private student loans, and protected federal student loans from turmoil in the financial markets.

“Earlier this year, we made the decision to invest in students and American jobs and protect taxpayers,” said Miller, the author of the Student Aid and Fiscal Responsibility Act. “Today those critical dollars will go out to colleges and to organizations that are working hard to ensure our students are able to graduate college fully prepared to compete in a global economy.”

The College Access Challenge Grant Program bolsters college access and completion support for students. It supports unique programs at states and institutions that focus on increasing financial literacy and helping institutions retain and graduate students. It was originally passed as part of the College Cost Reduction and Access Act in 2007.  In the Student Aid and Fiscal Responsibility Act, enacted as part of  the historic Health Care and Education Reconciliation law earlier this year, the program received $150 million a year for the next five years. The total investment in this program was $750 million.

Additionally, $85 million will go out today to HBCUs and $30 million to TCUs. The investments will help renew, reform and expand programs at these institutions to ensure all students are able to succeed.  The Student Aid and Fiscal Responsibility Act invested a total of $2.55 billion in HBCUs and minority serving institutions over the next 10 years.

More information about the Student Aid and Fiscal Responsibility Act

“With tonight’s vote, the House acted on behalf of American workers, teachers and students across the nation who have suffered in the recent economic downturn.

“The bill helps to close a multi-billion dollar shortfall in the Pell Grant program that could have deterred many low-income students from attending college, and allocates $10 billion in emergency spending to save hundreds of thousands of teachers from losing their jobs due to local budget shortfalls. This vote will ensure our teachers remain in the classrooms and our students don’t lose a year of learning.  We will not allow our children’s education to become a casualty of the state of the economy.

“Additionally, tonight’s vote represents a significant victory for America’s workers by providing additional funding for mine safety enforcement cases to help workers safe, and provides our communities’ first responders basic collective bargaining rights so they can keep our communities safe and strong.

“These are responsible, targeted investments that will create and secure jobs, and keep our promise to our nation’s children.

More information on provisions of H.R. 4899:

•    Education Jobs: The 2010 Supplemental Appropriations Act creates a $10 billion Education Jobs fund to provide emergency support to school districts to prevent layoffs and keep 140,000 school employees on the job next year. The Department of Education will administer the fund and distribute the money to states through a formula based on total population and school age population. States will distribute the funds to school districts through their primary funding formula or through the Title I formula. The bill includes strict provisions that requires states to use this funding only to preserve, rehire or hire new employees in elementary and secondary education. The money can’t be used to supplant state education spending.

•    Pell Grants: The 2010 Supplemental Appropriations Act invests $4.95 billion, fully offset, to address the current year shortfall in the Pell Grant Program. In the last academic year, more than 8 million students received Pell grants.

•    Miner Safety and Review Commission Backlog: The 2010 Supplemental Appropriations Act would provide a $22 million down payment to reduce the backlog of mine safety enforcement cases and to ensure that there are sufficient resources for the federal Mine Safety and Health Administration to meet all of its legally mandated mine inspection requirements. In February, the committee found that a flood of mine owner appeals is undermining efforts to protect miners by delaying tougher sanctions. A dangerous mine cannot face tougher penalties or increased scrutiny by MSHA unless citations are fully adjudicated. Because of this backlog of appeals, cases now take several months or years to be resolved.

•    Public Safety Personnel Collective Bargaining: It will guarantee collective bargaining rights for first responders employed by states and localities. States would administer and enforce their own labor laws, while the Federal Labor Relations Authority would only step in where such laws do not exist or do not meet minimum standards. The language prohibits public safety officers from engaging in a lockout, sickout, work slowdown, strike, or any other organized job action that will disrupt the delivery of emergency services.

“Today, students and families working hard to pay for college get some much-needed relief,” said U.S. Rep. George Miller (D-CA), chair of the House Education and Labor Committee and author of the Student Aid and Fiscal Responsibility Act. “These new benefits build on the premise that in this country, no one should have to mortgage his or her future to get a good education.”

The reliable and cost-efficient federal Direct Loan program provides students with the same loans as banks – but at a cheaper price for taxpayers by removing unjustified subsidies. Private lenders and banks will still have a role in servicing all federal student loans, which will guarantee borrowers high-quality customer services, maintain jobs in the private sector, and even protect jobs from being shipped overseas. Direct student loans, unlike loans made by banks, must be serviced by U.S. workers.

For the upcoming academic year, the Pell Grant scholarship will increase to $5,550 and, beginning in 2013 the maximum scholarship will increase with the cost of inflation by linking the scholarship to the Consumer Price Index. Approximately 8 million U.S. students rely on the Pell Grant scholarship each year to help pay for college.

For student borrowers, interest rates on the subsidized federal student loans will decrease from 5.6 percent to 4.5 percent. This is a benefit passed as part of the College Cost Reduction and Access Act.

Read a detailed fact sheet

State by state numbers

Currently, for-profit colleges account for less than ten percent of total higher education enrollment but account for approximately 25 percent of all Federal student aid disbursements.

The study will focus on the rapid growth of this industry over the last few years, the reported aggressive recruitment of students, increased variety in the delivery methods used to provide education to students and the quality and value of education provided.  Many for-profit colleges play a valuable role in post-secondary education, but taxpayers and students must have confidence that these programs consistently provide high-quality education opportunities.

The letter comes on the heels of an Education and Labor Committee hearing where the U.S. Department of Education Inspector General  raised concerns about accrediting agencies’ oversight of the credit hour policies at institutions of higher education, including some for-profit institutions.  Credit hours are used to determine the amount of Federal aid for which a student is eligible.


The full text of the letter is below.


Gene L. Dodaro
Acting Comptroller General
U.S. Government Accountability Office

Dear Mr. Dodaro:

We write to request that the Government Accountability Office (GAO) conduct a review of the for-profit or “proprietary” postsecondary education sector and the sector’s share of revenue derived from Federal student aid funding. The federal investment in the proprietary sector is significant.  While this sector accounts for less than 10 percent of total enrollments, it accounts for roughly 25 percent of all Federal student aid disbursed. 

Recent press reports have raised questions about the quality of proprietary institutions.  These questions stem from the rapid growth of this industry over the last few years, reported aggressive recruitment of students by such institutions, increased variety in the delivery methods used to provide education to students, and the value of the education provided by such institutions. 

On March 30, 2010, President Obama signed the Health Care and Education Reconciliation Act into law.  That legislation expanded student aid opportunities for students, including an historic $36 billion investment in the Pell Grant program.  The increased availability of Federal student aid, coupled with the significant growth of the proprietary sector, raises the issue of whether current safeguards are sufficient to protect the best interests of students and ensure that the nation’s taxpayers are achieving the best possible return on their investment.

In conducting its review, we are particularly interested in GAO examining:

•    The growth and change in the postsecondary education sector over the last several years, including changes in the structure and governance of institutions, recruitment practices, and the type and delivery of educational programs provided;
•    What is known about the quality of educational programs offered by proprietary institutions and the outcomes for students attending such institutions, such as program completion rates, professional licensure rates, job placement rates, and student loan indebtedness;
•    Whether existing program integrity safeguards are sufficient to protect against waste, fraud and abuse in the Federal student aid programs; and
•    The extent to which proprietary institutions’ revenue is comprised of Federal student aid offered under Title IV of the Higher Education Act as well as other Federal funding sources.

Finally, based on your review, we request that you provide any recommendations you believe may be warranted.

“It is unacceptable that institutions are inflating credit hours to profit off of student aid, when taxpayers and students are footing the bill,” said U.S. Rep. George Miller (D-CA), chair of the committee. “This Congress has worked to make sure our student aid programs work in the best interest of students. Congress must ensure that the accreditation process works to ensure that institutions of higher education provide high quality education programs worthy of students’ and taxpayers’ investments.”

The Department of Education Inspector General has issued several reports looking into accrediting agencies' standards for program length. The most recent report, reviewing the Higher Learning Commission of the North Central Association of Colleges and Schools (HLC), found HLC’s standards for accreditation do not establish the definition of a credit hour or set minimum program length and the assignment of credit hours.  

“This issue has become even more significant as on-line education has exploded in recent years, making credit hour assignment difficult, its comparison to traditional classroom delivery a challenge, and its value increasingly important in order to ensure that students and taxpayers get what they are paying for,” said Kathleen Tighe, Inspector General at the U.S. Department of Education.

Sylvia Manning, President of HLC testified that there is “room for improvement in accrediting agencies’ assessment and assurance of quality,”  but expressed doubt that defining a credit hour would contribute to the assurance or improvement of quality in American higher education.

Yesterday, the Department of Education proposed rules and definitions to strengthen federal student aid programs, including a definition of a credit hour. In addition, the Department is proposing that accrediting agencies develop procedures to determine whether institutions of higher education credit hour policies are acceptable.  

To view witness testimony, click here.

“As we rebuild our nation’s economy by putting Americans back to work, we must also strengthen our competitiveness for generations to come. Science, technology, mathematics and engineering are all fields that have a long history of spurring American innovation, and are fields that will continue to play an enormous role in both our national and global economies. By voting to pass the renewal of the COMPETES Act, the Science and Technology Committee took an important step toward building a stronger workforce by improving science, technology engineering, and mathematics education in colleges and universities across the U.S.

“This legislation rightly recognizes that today’s students are tomorrow’s innovators, and that our focus on job creation must be coupled with a focus on preparing our students for high-growth, high-demand jobs. It will increase the number of college graduates with degrees in science, technology, engineering, and mathematics and help move us closer to achieving President Obama’s goal of having the highest proportion of college graduates in the world by 2020. I congratulate Chairman Gordon and all members of the committee for their work on this bill and look forward to its consideration by the full House.”

More information on the COMPETES Act

“Last month, Congress took a groundbreaking step to reform a federal student loan system that for too long worked in the best interests of big banks and corporate tycoons, instead of students and families. Sadly, our nation’s bankruptcy laws are another example of how lenders’ well-heeled lobbyists successfully gamed the system and won special treatment – at the expense of millions of Americans working hard to pay back their college debt.

“In 2008, the Democratic Congress took important steps to provide long overdue consumer protections for students when borrowing financially risky private student loans, but more needs to be done. Private student loans remain far more expensive for borrowers than federal student loans, and often carry tricky terms and conditions. Especially in this economy, private student loan borrowers deserve the same basic protections consumers receive when using their credit cards, buying a car, or paying their electric bills.

“As Congress continues working on reforms to end Wall Street shenanigans, this legislation is a clear, common sense step we can take to restore some financial fairness for millions of consumers. I want to thank Reps. Cohen and Davis for their unparalleled efforts to stand up for students and borrowers around the country and call on all of our colleagues to join us in ending this special giveaway to for-profit companies.”

BACKGROUND

Bankruptcy legislation enacted by President George W. Bush in 2005 included a provision – slipped quietly into the bill – that provided special treatment to for-profit lenders by severely limiting Americans in bankruptcy from discharging the private college loans they borrow.

Unlike federal student loans, which have a cap on interest rates and can have flexible repayment options for borrowers, including an Income Based Repayment program authored by Miller, private student loans have no interest rate cap and no cap on the total amount a student can borrow. Due to this 2005 change, bankruptcy law now treats private student loan borrowers the same as individuals trying to escape child support payments, alimony, overdue taxes and criminal fines.

H.R. 5043 is supported by a broad coalition of student groups, consumer advocates and higher education organizations, including Consumers Union, Consumer Federation of America, The Institute for College Access and Success and the National Association of Student Financial Aid Administrators.

More information on H.R. 5043, the Private Student Loan Bankruptcy Fairness Act of 2010

“Secretary Duncan has taken an important step today for all students, recognizing every child in this country deserves the same opportunities, both in classroom and on the athletic field. Since its inception, Title IX has worked in schools across the country on behalf of all Americans, despite the Bush administration’s efforts to shamefully turn back the clock and weaken the protections in the law.  President Obama, Secretary Duncan and I all know we have a responsibility to strengthen and enforce Title IX to help all students, and bring new opportunities to the playing field in collegiate sports. Today’s decision is a win-win for student athletes, schools and sports enthusiasts. ”

The law makes health care even more affordable for the middle class, lowers prescription drug costs for seniors by closing the “donut hole” over time, reduces the deficit and strips out special deals that favored one state over another. The bill also makes the most sweeping changes to our federal student loan program in a generation.

U.S. Rep. George Miller (D-CA), the chair of the House Education and Labor Committee, and the co-author of both pieces of reform in the House, issued the following statement after attending the signing ceremony:

“Today marked the last leg of a long journey to bring historic health insurance and student loan reforms to the American people. With his signature today, President Obama has changed the way Washington works by ending the stranglehold banks and insurance companies have long held over policymaking. In doing so, he has handed America’s students, families and taxpayers two tremendous victories.

“Because of this law, the promise of quality, affordable health insurance is becoming real for every American. Strong accountability for insurance companies and vital protections for consumers will soon exist. The days of health insurance discrimination are nearly gone.

“Because of this law, college students will be able to graduate with less debt, less burdensome debt payments, and more opportunity. Students and families will finally have a federal college aid system that works in their best interests – not in the interest of banks or big corporations.

“This is a major step forward for America’s middle class. Thanks to the leadership and courage of President Obama, families and taxpayers have won two important victories that will help improve their lives, reduce our deficit, strengthen our middle class, and secure a stronger economic future.”

More information on the Health Care and Education Reconciliation Act of 2010

The Senate approved the legislation earlier today, after making two minor revisions to the education portion of the package, which had no substantive effect on college aid benefits for students.

U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee, who authored the student loan bill and co-wrote the health insurance bill, issued the following statement tonight:

“This is a big day for middle-class families in America. Today, Congress voted to change the way Washington works. We ended a longtime stranglehold that banks and insurance companies have had over policymaking, and chose to stand with the American people.

“When I became chairman of the Education and Labor Committee, I dedicated the work of our committee to growing and strengthening America's middle class.  The actions we have taken today honor that commitment.  

“By passing historic health insurance and student loan reforms, we have spoken directly to the needs and concerns of middle class families grappling with the crushing costs of health care and college and the enormous obstacles to obtaining both.

“No longer will college students have to watch banks reap billions in federal handouts while they struggle to pay for college. No longer will children with pre-existing conditions get denied coverage, or will patients with insurance watch their coverage get pulled out from under them while they are in the middle of treatment.

“The strength of our economy and the greatness of our country depend on the opportunities Americans have to pursue their dreams.  We have opened an important door today for every American, a major accomplishment for which we can all be genuinely proud.”

More information on the health insurance reforms the House passed today.

More information on the student loan reforms the House passed today.

“Today the Senate listened to the American people by voting to improve our historic health reform law and stop sending wasteful subsidies to big banks, instead of students. These health reform improvements will start to benefit Americans immediately by making coverage more affordable, beginning to close the Medicare donut hole for seniors, and providing critical consumer protections for all Americans.

“These reforms will also end a sweetheart deal that banks have enjoyed for decades, at the expense of students and families. These savings will be used to help students and families pay for college and reduce our deficit. In fact, a new CNN poll shows a majority of Americans, on a bipartisan basis, support ending this handout for banks and reinvesting the savings directly in students. With one move, we will make college dramatically more affordable, prepare students for good jobs, help keep jobs in America, and reduce the deficit.

“I want to commend the Senate, and especially Senator Tom Harkin, for insisting on including reforms that will help families grappling with the crushing costs of both college and health care. In the coming hours the House will take the last leg of this historic journey by voting to send this measure to President Obama’s desk.”

More information on the health insurance reforms the House is voting on today

More information on the student loan reforms the House is voting on today

“Today marks a milestone in American history. This law takes a historic and dramatic first step to put families and small businesses back in control of their own health care, end insurance company abuses, and ensure all Americans have access to quality, affordable, secure health insurance.

“One last vital step remains in order to fully deliver on the changes for which Americans have waited nearly 100 years.  The Senate must now join the House in passing a companion measure that will significantly improve this new law by making coverage more affordable for families, strengthening immediate benefits and protections for consumers, and making the law fairer for all of the American people.

“The companion measure also includes a once-in-a-lifetime opportunity to stop wasting $61 billion of taxpayers’ money subsidizing banks in our student loan programs, and instead use that money to directly help students pay for college and reduce the deficit. Insurance companies and banks are now waging a last-ditch effort to kill both reforms in the Senate. Senators cannot allow special interests and their lobbyists to drown out the voices of the students, workers and families who overwhelmingly support this last piece of reform. I urge them to pass and send this bill to President Obama as quickly as possible.”   

More information on these additional improvements to the health reform law.

More information on the student loan reform piece of this legislation.

“Sallie Mae has a history of using scare tactics to hold on to their excessive taxpayer subsidies, bloated CEO salaries and perks, and well paid cadre of Washington lobbyists. Judging by their statements today, it is clear that Sallie Mae will continue to do or say anything in a last-ditch effort to save their sweetheart deal – billions of dollars that we think would be better spent directly helping students pay for college.

“In truth, under this legislation Sallie Mae stands to gain millions of new borrowers to service as a vendor under the Direct Loan program, as long as they provide high-quality services to their customers. In fact, Sallie Mae recently brought 2,000 jobs they had shipped overseas back to America to compete for and win their current Direct Loan servicing contract. They know that Direct Loans, unlike loans originated by banks, can only be serviced by U.S. workers – and will help keep jobs in local communities.

“Sallie Mae’s efforts to use their own employees to lobby against these reforms were exposed in a recent news story. According to workers at an Indiana servicing center, Sallie Mae executives used the threat of job losses to pressure their employees to lobby against these reforms, while privately admitting their jobs were not in danger. It is shameful that company executives are playing politics with an issue as sensitive as job losses and trying to pit their own workers against middle class families seeking access to college.”

Sallie Mae’s mixed messages on jobs and lobbying efforts were revealed in an article by Campus Progress last week. To read the full story, click here:http://www.campusprogress.org/fieldreport/5216/indiana-sallie-mae-outlet-gets-mixed-messages-on-jobs.

BACKGROUND

For months, banks have been making false claims about the legislation’s impact on jobs. In reality, this legislation will help protect and keep jobs in America. Under the bill, 100 percent of Direct Loans will be serviced by private lenders, which will maintain demand for workers.
Unlike loans made by banks, Direct Loans can only be serviced by workers in the U.S. Last year, Sallie Mae was forced to bring 2,000 jobs back to U.S. soil to win a direct loan servicing contract. Sallie Mae is now one of four private banks servicing 4.4 million direct loans.

“History has been made today. We promised health reform and we have delivered it,” said U.S. Rep. George Miller (D-CA), the chair of the House Education and Labor Committee. “Approval of this legislation marks a major moment in America’s march toward greater equality and opportunity – a journey that has been interrupted and delayed far too many times in my lifetime. This bill will create millions of jobs, reduce the federal budget deficit, and finally hold accountable the insurance companies that have caused so much panic and pain in the lives of hard-working Americans.”

“We come to this floor for thousands of votes each year, but no single vote comes with so many personal stories,” said U.S. Rep Sander M. Levin (D-MI), the chair of the House Ways and Means Committee.  “Within our families and our districts, people have spoken out about the need for real health insurance reform that gives every American access to quality, affordable care.  Republicans have turned their backs on the problem, claiming our nation would somehow be better off without reform – this is not the case. Today, in the tradition of America, we will pass health care reform and we will make our beloved country a still better nation.”

“Today is a historic day.  Over a century in the making, Congress has at last passed comprehensive legislation to provide access to quality, affordable health care for all Americans.  It will make a profound difference for our children, our families, and for generations to come,” said U.S. Rep. Henry A. Waxman (D-CA), the chair of the House Energy and Commerce Committee. “This will prove to be an enduring change for the better for our society and quality of life. Health security is a fundamental right for every American and we will remain faithful to the commitments we have made today.”

“After generations of debate, we have successfully addressed one of the greatest moral and economic problems of the day. What we have done tonight will protect health care, as well as jobs and our entire economy for generations of Americans,” said U.S. Rep. John D. Dingell (D-MI), the chair emeritus of the Energy and Commerce Committee and lead sponsor of H.R. 3962. “Thirty-two million Americans will get coverage that don’t have it. Millions more in danger of losing their coverage can sleep easier tonight knowing their coverage will be there. Almost all Americans can look forward to seeing their premiums go down. The youngest Americans, and the children born in the years to come, will not have to live with the fear that so many Americans have had to live with in the past. I am proud of the courage displayed by our colleagues today.  This is a great day for all of us, and I believe that someday all Americans will share that view.”

“Today's historic victory will transform our flawed health care system into something that works for Americans of all walks of life," said U.S. Rep. Rob Andrews (D-NJ), the chair of the Education and Labor Subcommittee on Health, Employment, Labor and Pensions. “By providing families and businesses with more choices and increased competition, the insurance industry will finally be held accountable to continue providing top-quality care while keeping premiums down. Most importantly, this bill puts a plan into place that decreases our deficit while ensuring coverage for 94 percent of all Americans so that millions will no longer feel powerless when in need of care.”

“The history of failed attempts at health care reform reaches back decades. But more important than the historical achievement is what the reformed system will do for everyday Americans,” said U.S. Rep. Frank Pallone, Jr. (D-NJ) the chair of Energy and Commerce Subcommittee on Health. “We aren't just making history, we are making a better health care system.”

“Forty-five years ago, President Johnson signed Medicare into law and guaranteed health care to every American 65 and over.  Today we have extended that guarantee to all Americans,” said U.S. Rep. Pete Stark (D-CA), the chair of the Ways and Means Health Subcommittee.  

For more information on the health insurance reform legislation passed today, click here.

Consistent with what President Obama first proposed last year, this legislation would eliminate unwarranted subsidies to banks in the federal student loan programs, and instead originate all loans directly through the government.

According to the Congressional Budget Office, this change will generate $61 billion in savings over 10 years that will be used to boost Pell Grant scholarships, make student loans more manageable for borrowers to repay, and strengthen community colleges.

Private lenders and banks will still have a role in servicing all federal student loans, which will guarantee borrowers high-quality customer services, maintain jobs in the private sector, and even protect jobs from being shipped overseas. Direct government loans, unlike loans made by banks, must be serviced by U.S. workers.

The federal government is now funding 88 percent of all federal student loan volume, between loans that are already lent to students directly through the government and an emergency aid program student lenders have relied on since the credit crisis in 2008.

The budget resolution passed by the House and Senate budget committees last year instructed Congress to use reconciliation – which requires a simple up or down vote – to pass health insurance and student loan reforms that reduce the deficit by $1 billion over five years. This student loan reform meets that requirement – it is fully paid for and reduces the deficit by at least $10 billion over 10 years. Altogether, the student loan reform and health reform bills reduce the deficit by $143 billion over 10 years.

Specifically these provisions will:

• Make college more affordable for millions of students by investing a total of $36 billion into the Pell Grant program over 10 years, including $22.6 billion to increase the maximum Pell Grant award to keep up with inflation;
• Protect students’ Pell Grant scholarships from the upcoming budget shortfall by investing $13.5 billion of those funds to help close the shortfall, caused by increased demand for the scholarship. Without this investment, 8 million students could see their Pell Grants cut by 60 percent next year and 600,000 students could lose their scholarships completely, according to the U.S. Department of Education;
• Keeps jobs in America. Rather than force private industry out of the system, lenders will compete for contracts to service all federal student loans, which will guarantee borrowers high-quality customer service and preserve jobs;
• Invest $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to help boost college retention and graduation of minority students;
• 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;
• Give students the support they need to stay in school and graduate by investing $750 million in college access and completion programs; and
• Prepare students and workers for competitive jobs by investing $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs.

For a longer fact sheet on this legislation, click here.

To learn more about what these reforms mean for students, click here.

For a myth-fact sheet on this legislation, click here.

To view how this legislation would benefit students in each congressional district, click here.

Because of this legislation, for the first time in America’s history, never again will Americans have to worry about losing their health insurance if they change or lose their job.
 
Insurance companies will not be able to jack up premiums or deny coverage because of a pre-existing condition.
 
They will not be able to drop people’s coverage when they get sick – and need it most.
 
There is no other plan on the table today that offers Americans these vital assurances.

Our reforms will improve the lives of every single American – those with insurance today and those without it.
 
They will improve our economy by reducing the deficit, creating up to 4 million jobs over the next decade, and unshackling innovative business decisions from crippling health insurance costs. 
 
Our legislation offers families and employees of small businesses access to choices of affordable health plans; security and control over their health care; vital federal and state consumer protections; accountability for insurance companies; and coverage for 32 million Americans who don’t have insurance today.
 
Now, we’re pairing these truly historic health insurance reforms with another opportunity that cannot be missed: The chance to make the single largest investment in college affordability ever – and at no cost to taxpayers.

We are going to take tens of billions of dollars that for decades has gone to banks in the federal student loan program and instead give that money directly to students and to pay down the deficit.
 
For decades, these banks have had one of the sweetest deals in America: They receive taxpayer subsidies to make virtually risk-free loans to students.
 
As we speak, the federal government is now funding 88 percent of all federal student loan volume.
 
It has proven to be a more stable lender for students through shaky financial markets and a more cost-effective lender for taxpayers.
 
Ending these subsidies is not a radical idea.
 
President Clinton first identified these subsidies as wasteful in the 1990s.
 
President Bush eyed them in three of his budgets.
 
And President Obama has correctly proposed ending this boondoggle once and for all by originating all loans through the federal direct lending program – saving taxpayers $61 billion over 10 years. 
 
And that’s what our legislation accomplishes.
 
Our reforms are good for students, taxpayers and American jobs.
 
We will help low and middle-income students pay for college and invest in the support they need to graduate.
 
We will be more responsible with taxpayer dollars by using $10 billion of these savings for deficit reduction.
 
And we will end the practice of banks shipping lending jobs offshore.
 
Our reforms allow private lenders to service 100 percent of direct loans – preserving good jobs. But, unlike loans originated by banks, direct loans can only be serviced by workers in the United States.
 
That’s why last year, Sallie Mae brought 2,000 jobs they had shipped overseas back home.
 
It turns out they were competing for – and won – a direct loan servicing contract.
 
In fact, Sallie Mae has privately told workers at an Indiana servicing center that these reforms will not put their jobs at risk. 
 
They said a similar thing publicly to an Indiana newspaper.
 
Sallie Mae is now one of four companies that service 4.4 million direct loans.
 
With these savings, we invest $36 billion over 10 years to increase the Pell Grant to its highest level ever – including almost $14 billion to protect students from a Pell Grant shortfall.
 
If we don’t act immediately, eight million students could see their Pell Grants cut by 60 percent next year, and 600,000 students could lose their grants completely.
 
We will help new borrowers better manage their monthly payments.
 
We invest in community colleges, we invest in college access and completion programs, and we give vital support to Historically Black Colleges and Universities and Minority Serving Schools that play a unique role helping minority students graduate and succeed.
 
HBCUs graduate 40 percent of African-American students earning math, science, technology and engineering degrees, and 50 percent of African-American teachers.
 
And, this bill is fully paid for.
 
With this one move, we can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.
 
I’d like to thank Ruben Hinojosa, our higher education subcommittee chair, Tim Bishop, and all of our committee members for their tireless work on student loan reform.
 
And along with all the members of our committee, I’d like to especially thank Rob Andrews, our health subcommittee chair, for his backbreaking work over the last year on health reform.
 
We almost didn’t get here today.  You know that.
 
Opponents of health care reform have said anything and done everything to distort the facts, delay the process, and try to put off what Americans have asked for and needed for generations. They have tried to sow fear into the American people.
 
They cannot win on the merits. And they will continue to distort the facts and use scare tactics as we move forward.
 
But here we are today. We have made it to the final step in this process – despite all that noise.
 
And now we face a simple choice.
 
We can side with America’s families and college students and make health insurance and college more affordable and accessible – while creating millions of jobs and reducing the deficit.
 
Or, we can side with insurance companies and banks.
 
That’s it.
 
That’s the choice.
 
I’m siding with the American people. I urge each of my colleagues to join me.

“This legislation offers the most sweeping changes to the federal student loan program in a generation,” said Miller, who unveiled the details of the package this morning.  “This is really about making a simple choice. Congress can either continue the longstanding boondoggle that rewards banks with tens of billions of dollars in subsidies at the expense of families and taxpayers – or we can invest that money directly in students and America’s world economic leadership.

“Well, the Democratic leadership in Congress has made its decision -- we’re going to help students and their families,” Miller said.

“This is good for students, taxpayers, and American jobs,” Miller added. “With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.”
 
Miller worked closely on this legislation with Sen. Tom Harkin (D-IA), who unveiled the provisions in the Senate today.  

“Education is the key to success in this country. It has the ability to transform a young person’s life and give them opportunities above and beyond the generations before them. But as millions of Americans struggle to afford the costs of higher education, multi-billion-dollar, taxpayer financed subsidies continue to flow to private banks,” said Harkin. “As Americans tighten their belts and make smart choices with their money, Congress should too.  Our bill redirects that funding to students and families, making college more affordable and ensuring that more Americans have access to higher education and the skills to succeed in the 21st Century economy.”

Consistent with what President Obama first proposed last year, this legislation would eliminate wasteful subsidies to banks in the federal student loan programs, and instead originate all federal student loans directly through the government.

According to the Congressional Budget Office, this change would generate $61 billion in savings over 10 years that will be used to boost Pell Grant scholarships, make student loans more manageable for borrowers to repay, and strengthen community colleges.

Private lenders and banks would still have a role in servicing all federal student loans, which would guarantee borrowers high-quality customer services, maintain jobs in the private sector, and even protect jobs from being shipped overseas. Direct government loans, unlike loans made by banks, must be serviced by U.S. workers.

The federal government already funds 88 percent of all federal student loan volume, between loans that are already lent to students directly through the government and an emergency aid program student lenders have relied on since the credit crisis in 2008.

The budget resolution passed by the House and Senate budget committees last year instructed Congress to use reconciliation to enact both health insurance and student loan reforms that reduced the deficit by $1 billion over five years. The reconciliation measure today meets those requirements – it is fully paid for and reduces the deficit by at least $10 billion over 10 years.

Specifically these provisions will:

•    Make college more affordable for millions of students by investing a total of $36 billion into the Pell Grant program over 10 years, including $22.6 billion to increase the maximum Pell Grant award to keep up with inflation.  The bill increases the maximum award from $5,550 next year to nearly $6,000 over the years ahead.  In the 2008-2009 year, 6.2 million Americans relied on Pell Grants to help pay for college and career training; eighty-nine percent of those students came from families making less than $40,000 per year.  

•    Protect students’ Pell Grant scholarships from the upcoming budget shortfall. The provisions will direct $13.5 billion of the $36 billion Pell Grant investment to address most of the gap needed to ensure there is not a dramatic cut in Pell grant funding in 2011. Because the Pell Grant program will be faced with increased costs due to higher demand, the maximum award could decrease to $2,150 from its current value of $5,350.  If this is not addressed, students could see a decrease in aid of almost 60 percent and nearly 600,000 students could lose the benefit entirely.  

•    Keeps jobs in America. Rather than force private industry out of the system, lenders will compete for contracts to service all federal student loans, which will guarantee borrowers high-quality customer service and preserve jobs. Unlike loans made by banks, Direct Loans can only be serviced by workers in the U.S. Last year, Sallie Mae brought 2,000 jobs back to U.S. soil to win a direct loan servicing contract. Sallie Mae is now one of four private banks servicing 4.4 million direct loans.

•    Invest $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions. This bill recognizes the important role that minority-serving institutions play in educating our country’s low-income and minority students by continuing the funding provided in the 2007 education reconciliation bill for Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other MSIs.

•    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.

•    Give students the support they need to stay in school and graduate.  The provisions invest $750 million in the College Access Challenge Grant (CACG) program. These formula grants to states help organizations provide services that increase the number of low-income students who are prepared to enter and succeed in college and manage their student loans, such as financial literacy and debt management skills.

•    Prepare students and workers for competitive jobs by investing $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs.

Additional Information:

Myth/Fact document on student loan reform
Fact Sheet on student loan reform

U.S. Rep. George Miller (D-CA), the chairman of the House education committee and the author of the student loan reform bill that passed in the House in September, today said he was encouraged by today’s development and that this decision, if finalized, would boost overall support for passing health insurance reform:

“I am encouraged by indications this afternoon that the Senate appears to agree with us that we should join the health and student loan reform bills in one reconciliation package.  Supporting students and their families rather than banks is a win-win for our country, is a much better use of taxpayer dollars, and is helpful to passing the overall health reform bill.

“Sen. Harkin and I and many of our colleagues have been making the case that joining these two bills presents a remarkable opportunity for our country.  I am encouraged by reports today and I look forward to a final decision on this matter.

“Congress has a history of enacting student loan reforms through the reconciliation process, under both Democratic and Republican Congresses. Presidents Bill Clinton and George W. Bush recommended reducing the wasteful subsidies that banks get paid at the expense of students and taxpayers and President Obama made it a priority at the outset of his administration.

“We must not waste this opportunity to fix America’s broken health insurance system and make college much more affordable, at no cost to taxpayers.”

Miller held a press conference with Harkin and other lawmakers earlier today; to watch clips click here.

BACKGROUND

At his press conference earlier today, Miller cleared up several key points of confusion surrounding the student loan reform bill:

•    First, any student loan bill that would be included under reconciliation would have to be deficit neutral and return $1 billion in savings to pay down the deficit.  Contrary to media reports that the bill could increase the deficit, any investments included under the bill would be entirely paid for.
•    Second, the legislation will preserve jobs. For months banks have claimed that switching to Direct Loans would eliminate jobs. They are wrong. The student aid bill would maintain a servicing role for lenders, which will preserve jobs and, unlike in the current system, keep banks from shipping these jobs overseas. Last year, Sallie Mae, one of four private companies that currently services Direct Loans, had to bring 2,000 jobs home from overseas in order to be eligible for the servicing contract.
•    Third, it has always been known that student loan reform would move as part of a reconciliation measure. Last year’s House Budget Resolution for Fiscal Year 2010 included instructions for the House Education and Labor Committee to enact student loan reforms that produce $1 billion in savings to help reduce the deficit over the next five years. In order to meet these reconciliation requirements, any student loan reform will have to help reduce the deficit.
•    Fourth, these subsidies to lenders have been identified as wasteful by both Democratic and Republican presidents. In addition to President Clinton and President Obama, who both identified these subsidies as wasteful, President George W. Bush’s 2005, 2006 and 2008 budget proposals called for reducing these federal subsidies to private banks.
•    Finally, this is the only opportunity to enact these reforms. As the lawmakers said today, student loan reform must move under these reconciliation instructions – or it won’t happen.

More information on student loan reform

The 2009 budget resolution provided reconciliation instructions for Congress to use for both health insurance  reform and student loan reform. To comply with the reconciliation instructions, the student loan reforms have to be budget neutral and reduce the deficit by $1 billion over five years. Budget rules require that both bills would move together as one reconciliation measure – they cannot be moved separately.

The House passed the legislation, the Student Aid and Fiscal Responsibility Act, in September with bipartisan support. The bill, which was first proposed by President Obama, would eliminate wasteful taxpayer subsidies to banks in the federal student loan programs and invest the savings in students, families and taxpayers. The reliable and cost-efficient federal Direct Loan program, which many schools already use, would provide students with the same loans as banks – but at a cheaper price for taxpayers.

At the press conference today, Miller cleared up several key points of confusion:

• First, any student loan bill that would be included under reconciliation would have to be deficit neutral and return $1 billion in savings to pay down the deficit.  Contrary to media reports that the bill could increase the deficit, any investments included under the bill would be entirely paid for.
• Second, the legislation will preserve jobs. For months banks have claimed that switching to Direct Loans would eliminate jobs. They are wrong. The student aid bill would maintain a servicing role for lenders, which will preserve jobs and, unlike in the current system, keep banks from shipping these jobs overseas. Last year, Sallie Mae, one of four private companies that currently services Direct Loans, had to bring 2,000 outsourced jobs back to the U.S. in order to be eligible for the servicing contract.
• Third, it has always been known that student loan reform would move as part of a reconciliation measure. Last year’s House Budget Resolution for Fiscal Year 2010 included instructions for the House Education and Labor Committee to enact student loan reforms that produce $1 billion in savings to help reduce the deficit over the next five years. In order to meet these reconciliation requirements, any student loan reform will have to help reduce the deficit. 
• Fourth, these subsidies to lenders have been identified as wasteful by both Democratic and Republican presidents. In addition to President Bill Clinton and President Barack Obama, who both identified these subsidies as wasteful, President George W. Bush’s 2005, 2006 and 2008 budget proposals called for reducing these federal subsidies to private banks.
• Finally, this is the only opportunity to enact these reforms. As the lawmakers said today, student loan reform must move under these reconciliation instructions – or it won’t happen.
  

To read Miller’s remarks at today’s press conference, click here.

To watch the question and answer portion of the press conference, click here.

More information on the Student Aid and Fiscal Responsibility Act.

Senate Democrats have a very simple choice to make in the next few weeks.

This choice speaks to the true character of our country and of our Congress.

It speaks to what America’s priorities will be for the next generation.

It speaks to fiscal responsibility and fairness.

Here’s the choice. We can continue a student loan program that the Congressional Budget office has documented will waste tens of billions of dollars over the next 10 years on a titanic boondoggle in excess subsidies to some of the nation’s rich and most powerful banks.

Or we can do what President Obama suggested in his budget, and what the Congress voted last year to do in its budget resolution.  We can reform the student loan program by taking these wasteful subsides to banks, and redeem the savings for millions of families and students who want a shot at attending college, go to a community college, and attend a school that is crumbling around them. 

It is that simple.

Just consider what this bill would do for students, families – and our economic future.

It would invest tens of billions of dollars in the Pell Grant scholarship.

For millions of Americans, Pell Grants are the pathway to prosperity.

They have become America’s great equalizer – allowing anyone with talent and gumption to get an education and a good job.

There are few greater job creators than a highly skilled workforce.

Our bill would invest billions in school modernization, give urgent help to historically black colleges and Hispanic serving institutions, and boost support for the nation’s bedrock local community colleges.

It would make our community colleges part of the solution to our competitive challenges by giving them the tools they need to prepare students for good jobs with local employers.

Who in good conscience can trade any of this away for billions in excess subsidies for banks?

Now, this is not a radical idea.

In his 2005, 2006 and 2008 budget requests, President George W. Bush recommended reducing these wasteful subsidies by tens of billions of dollars.

President Obama has shown the courage to take this on by insisting we re-deploy all of these subsidies to help students and families.

The 2009 budget resolutions passed by the House and Senate required both chambers to use reconciliation to enact student loan reforms that save taxpayers billions of dollars.

In order to comply with these reconciliation instructions, we would be required to save $1 billion for taxpayers over 5 years.

This legislation would be fully paid for.

But now this promise is at risk.

Critics of this bill, fueled by the banks’ well heeled lobbyists, have been hard at work fighting to kill it.

They have been busy spreading lots of falsehoods about how this bill might impact the budget, or jobs, or students.

Let me set the record straight, right now.

This bill will not add a penny to the deficit – it will help reduce it. The budget reconciliation instructions require that any student loan reforms return at least $1 billion to the Treasury over 5 years.

It will meet PAY-GO. We are committed to that, and it will be done.

The bill creates and retains jobs.  It maintains a robust and appropriate role for private banks and lenders in servicing loans. Servicing loans through the Direct Loan program will not only preserve most jobs, it will bring jobs back home that can currently be shipped overseas by lenders.

Moving to Direct Loans is a much better use of taxpayer dollars. Consider that right now, between schools that have switched to Direct Loans and emergency federal aid banks are relying on – the federal government is already funding 8.8 of every 10 dollars lent in federal student lending.

The current FFEL system can’t continue.  We saw this two years ago when the markets seized up, students would have been left high and dry if we had not stepped in to provide liquidity. 

It’s also wrong to suggest this is being talked about at the 11th hour.

We have known since last April that reconciliation would be used for this bill.

So this is really what is comes down to now.

The Senate has a choice to do something that is fair and right for American families.

They have a choice to end this system of corporate welfare for banks – a system that has stayed alive because of well-entrenched lobbyists and cozy Washington relationships.

They can either continue to send tens of billions of dollars to banks and a broken system – or they can send those dollars directly to students, at no costs to taxpayers.

This is a moment in history where Senators can either look back and say – we did the right thing for the American people, or they can say we did the bidding of banks.

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“Under the leadership of President Obama and Secretary Duncan, the U.S. Department of Education has made tremendous strides to build a stronger economy by providing our students with the knowledge and skills they need to compete globally,” said U.S. Rep. George Miller (D-CA), the chairman of the committee. “If we’re serious about reaching President Obama’s goal of producing the most college graduates in the world by 2020, we will need to make sure that our students are prepared for college – and that they can afford to go once they get there.”

“We have made extraordinary progress in meeting the needs of our schools and communities in the midst of financial crisis and recession, making long-needed reforms in our Federal postsecondary student aid programs, and reawakening the spirit of innovation in our education system from early learning through college,” Duncan said. “The next step to cement and build on this progress is to complete a fundamental restructuring of ESEA.”

As Duncan explained today, over the past year the administration focused on making sure that education was not another casualty of the economic crisis. The American Recovery and Reinvestment Act included $100 billion in funding to help stave off layoffs of teachers and other school staff. To date, the Department of Education has awarded more than $69 billion of that funding, supporting 400,000 jobs overall -- including 300,000 jobs for principals, teachers, librarians and counselors.  

ARRA also created a $4.35 billion competitive grant program called Race to the Top, which incentivized states to make reforms in four key areas: strengthening the quality of teachers, assessments, standards and helping turn around struggling schools. To date 40 states and the District of Columbia have made changes to apply for these grants.

In his statement, Duncan said the President’s 2011 budget seeks to build on that progress by meeting several goals: “supporting reform of struggling schools, improvements in the quality of teaching and learning, implementation of comprehensive statewide data systems, and simplifying student aid.”

Duncan told lawmakers that the budget not only lays out core goals for rewriting ESEA, but also seeks to further change how education funding is awarded – so that investments are used to leverage effective reforms.

“We also propose to increase the role of competition in awarding ESEA funds to support a greater emphasis on programs that are achieving successful results,” Duncan continued.

Last month, bipartisan lawmakers on the committee announced plans to work together to overhaul ESEA. The committee has already begun to hold hearings and has asked stakeholders for their suggestions for how to improve the law.

Duncan also renewed his call for Congress to enact the historic Student Aid and Fiscal Responsibility Act, legislation authored by Miller and passed by the House in September. The legislation would save $87 billion over 10 years by eliminating subsidies to banks in the federal student loan programs and would reinvest those savings directly in students, families and taxpayers.

The bill reflects the administration’s goals of investing in students from “cradle-to-career.”It invests $8 billion over eight years to transform early learning programs that would help our earliest learners arrive at kindergarten ready to succeed. It creates a more competitive community college system by investing $10 billion to help these colleges prepare students for local jobs in growing fields. And it makes unprecedented investments to make college more affordable and accessible for students, including a $40 billion increase in funding for Pell Grants over 10 years and simplifying the federal student aid application.

The president’s FY 2011 budget also calls on Congress to help make student loans more manageable for borrowers to repay by strengthening an Income-Based Repayment program enacted by Congress in 2007.

“Just as essential to preparing students for college is ensuring that students and families have the financial support they need to pay for college,” Duncan said. “No one should go broke because of student loan debt.”

For more on the committee’s efforts to rewrite ESEA, click here.

For more on the Student Aid and Fiscal Responsibility Act, click here.

“One year ago, our nation was headed toward an economic collapse, shedding an average of 600,000 jobs a month. State and local budget cutbacks were putting teachers’ jobs – and our students’ education – in peril. Our economy was in need of emergency triage that would immediately begin to save and create jobs and lay the foundation for longer-term economic growth.

“One year after its enactment, it is clear that the American Recovery and Reinvestment Act is meeting these core goals. To date, the law has already created or saved two million jobs and helped our economy grow at its fastest rate in years. It has funded more than 300,000 education jobs, keeping teachers in classrooms and children and students of all ages learning. It has helped minimize harmful cuts at public colleges and universities and provided students with larger Pell Grants to pay for college.

“The Recovery Act has provided a much-needed lifeline for workers who lost their jobs – and their health insurance along with it. Millions of Americans have received extended or increased unemployment benefits and many got help paying for their COBRA premiums because of the Recovery Act. We can’t underestimate the difference this has made for laid-off workers struggling to put food on their tables, heat their homes, or pay for a visit to the doctor.

“The Recovery Act is also making strategic investments in our future. Recovery programs are training displaced workers for high-growth jobs in our health care, biotech, clean energy and manufacturing sectors. The Race to the Top program is leveraging key education reforms that will better prepare our children for college, competitive jobs and a global economy.

“As President Obama and Congress have repeatedly said, the Recovery Act marked the beginning of our efforts to rebuild our economy and our middle class. Too many workers continue to lose their jobs or have trouble finding new ones. Our work will not be over until every American in need of a job can find one.”

RECOVERY ACT: HELPING STUDENTS, WORKERS AND FAMILIES

• 2 million: the number of jobs created or saved by Recovery dollars thus far, according to the Congressional Budget Office.
• 300,000: the number of teaching and other education-related jobs saved or created.
• $500: the increase in the Pell Grant scholarship eligible students received for the 2009-2010 year due to this law alone. 
• $2.4 billion: the amount of Federal support that helped colleges and universities keep teaching, even as enrollments grew, according to the State Higher Education Executive Officers.

“This legislation wisely targets our resources in the workers and families who need the most help weathering this economy.

“It makes key investments to help dislocated workers get the training and skills they need for good jobs in high growth industries and increases worker protections against wage theft and exploitation so that employees who work hard and play by the rules get their fair shake.

“It takes important steps to strengthen our health care workforce and meet the health care needs of families as Congress continues working to fulfill our promises to reform our broken health insurance system.

“It enhances our future competitiveness by boosting teacher effectiveness and addressing our high school dropout crisis -- two approaches that will help more students graduate from high school with a quality education. It continues our commitment to the Pell Grant scholarship so Americans have access to an affordable college education and further invests in Historically Black Colleges and Universities and Minority-Serving Institutions. And it supports early education opportunities to put our youngest learners on the path to success.

“Altogether, these investments will help us build on the progress our economy is beginning to make and lay the groundwork for a sustainable recovery. I want to commend Chairman Obey and the Appropriations Committee for crafting a package that does right by students, workers and families and upholds our commitment to fiscal responsibility. I look forward to continuing to work with them to make further progress in rebuilding and strengthening our nation’s middle class.”

For more information on the Labor, Health and Education provisions in the Consolidated Appropriations Act, click here.

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Among other things, the recommendations encourage companies to partner with colleges, school districts and community colleges to better align student learning with employers’ needs.

“The Business Roundtable hit the nail on the head: education has to play a key role in revitalizing our economy,” said Miller. “As our economy continues to change shape and new industries continue to emerge and grow, we have to ensure we are preparing our next generation of workers with the skills they will need to compete. Developing strong partnerships between the business community and our classrooms and campuses is smart policy. This report reinforces the need for Congress to enact the Student Aid and Fiscal Responsibility Act as we work on short-term and long-term strategies for building a lasting economic recovery.”

Miller is the author of the Student Aid and Fiscal Responsibility Act, which makes unprecedented investments to make college affordable and accessible and boost the number of U.S. college graduates. One of the bill’s key provisions is President Obama’s community college initiative, which will help build a 21st century workforce by incentivizing partnerships between community colleges, businesses, job training and adult education programs. The House passed the bill in September, the Senate is expected to consider the legislation soon. For more information, click here.

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Miller is the author of the Student Aid and Fiscal Responsibility Act, legislation passed by the House in September that would achieve $87 billion in savings over 10 years generated through student loan reform and use those savings to help students pay for college, create new infrastructure jobs by funding school modernization projects, and improve early education for children, among other things. Harkin is working with his colleagues to draft companion legislation in the HELP Committee.

“Sallie Mae and other big lenders are trying to hold on to the bad old days of student lending where back room deals generated billions of dollars in profits for their shareholders,” said Harkin. “We are working on a bill to deliver real reform and investment for students and taxpayers, not more entitlements for wealthy bankers.”

Sallie Mae’s proposal, which is a revised version of a plan they tried to get support for in the House, would instead direct more than $8 billion of those savings to help lenders, not students and families.  

BACKGROUND

In September CBO released an estimate of Sallie Mae’s Community Loan proposal that estimated the program saved $17 billion less than the House proposed move to Direct Loans.  The newer version score by CBO had three major changes: it sunset the program after five years; it lowered the origination free from $75 to $55; and it eliminated the short-term loan that the government would make to lenders.

Most of the savings the Sallie Mae plan generates are achieved through the gimmick of sunsetting the proposal after five years.  In the original proposal only $6.5 of the $17 billion in costs were generated in the first five years driven by the expectations of larger loan volume in the coming decade.  Even as Sallie Mae and other lenders push this proposal for a “short-term” subsidy they are lobbying to extend the stop-gap Ensuring Continued Access to Student Loans Act for yet another year.  Ultimately, the five year sunset is only an effort to stave off the current effort at meaningful student loan reform.

Specifically, the lawmakers urged the presidents to prepare to make the Direct Loan program available to their students as an option for the 2010-11 school year. Both the Direct Loan and Federal Family Education Loan (FFEL) programs offer federal loans to students at the same terms and conditions and are much less expensive than private loans. However recent economic turmoil has seriously weakened the stability of the FFEL program, putting lenders’ participation in the program in doubt. In contrast, the Direct Loan program, which is cheaper for taxpayers, has remained insulated from the economic crisis and continued to operate normally for the campuses and students that use it.

 

“The recent economic turmoil has adversely affected the stability of one of our nation’s student loan programs,” Miller and Hinojosa wrote. “As you know, Secretary Duncan recently sent a letter urging institutions to be Direct-Loan ready for the 2010-2011 academic year and offering the help of the Department of Education in preparing for such a transition. I agree with the Secretary’s sentiments and I hope that you will seek the assistance and information offered by the Secretary and his staff in making choices about how the students at your institution can access Federal student loans. If we all take prudent action, we can achieve our shared goal of ensuring that every eligible student has access to the dependable student aid needed to pay for college and pursue their dreams.”

 
Miller, the chairman of the House Education and Labor Committee, and Hinojosa, the chairman of the panel’s higher education subcommittee, are the authors of legislation, the Student Aid and Fiscal Responsibility Act, to make the federal college loan program reliable for all students by switching all federal lending to the Direct Loan program by July 1, 2010. This move would save $87 billion over ten years, which would then be invested in historic increases in the Pell Grant scholarship and other forms of aid to help students pay for college. The legislation was proposed by President Obama and passed by the House of Representatives in September.

 

In their letter today, Miller and Hinojosa said that making necessary preparations to also administer Direct Loans on campuses was critical to guarantee students’ loan access, regardless of the outcome of the legislation or whatever happens in future economies.

 
In testimony before the committee last May, Pennsylvania State University, which switched to Direct Loans in March of 2008 to protect its 38,000 students from the credit crunch, reported that the campus did not have to hire extra staff or increase its budget resources during the transition, that Direct Loans offered better loan repayment and loan forgiveness options for students.

 

A July survey of financial aid officers from institutions that switched to Direct Loans found that 73 percent of those surveyed said the switch was easier than they thought. Eighty-four percent said the Department of Education was helpful in the conversion and 61 percent said administering DL was less burdensome than FFEL. Eighty percent of those surveyed report that they were able to switch programs within four months.

 

The full text of the letter to college presidents is below.

 

***

To whom it may concern:

 

As the head of your institution, Secretary Duncan recently sent you a letter urging institutions of higher education to be Direct Loan-ready for the 2010-2011 academic year and offering the help of the Department of Education in preparing for such a transition.  I agree with the Secretary’s sentiments, and I hope that you will seek the assistance and information offered by the Secretary and his staff in making choices about how the students at your institution can access Federal student loans.  This step will guarantee that your students will have uninterrupted access to Federal student loans in the coming years.  I have attached his letter for your reference.

 

The recent economic turmoil has adversely affected the stability of one of our nation’s student loan programs.  Specifically, as the economy fell into recession, private lenders’ continued participation in the Federal Family Education Loan (FFEL) program was in doubt. Many lenders did not have the capital needed to continue originating federally-guaranteed student loans, threatening students’ access to critical financing needed to pay their tuition and other postsecondary expenses. In response, Congress swiftly enacted a temporary backstop --the Ensuring Continued Access to Student Loans Act (ECASLA) -- that provided government financing to private lenders to originate Federal student loans.  While ECASLA temporarily ensured students’ access to loans, the Act is not a permanent solution to stabilize the FFEL program and expires in July 2010.   Despite ECASLA, moreover, private lenders, including some of the nation’s largest, continue to withdraw from the FFEL program.  In contrast, the Direct Loan program, which offers students the exact same loans but is cheaper for taxpayers, has remained insulated from the downturn in the economy and has continued to operate normally for those campuses that use it.

 

Additionally, as you may know, President Obama has proposed, and the U.S. House of Representatives has passed, legislation to make the Federal college loan system reliable for all students by moving to a 100 percent Direct Loan delivery system and investing the associated taxpayer savings in historic investments in Pell Grant and other forms of student aid.  I strongly believe that this legislation will ensure that the Federal student loan program works in the best interests of students, schools, and taxpayers, and will offers a permanent solution that guarantees access to Federal student loans regardless of economic conditions.  

 

In light of the above, it is increasingly important that institutions are prepared to also deploy the Direct Loan program for the 2010-2011 academic year.  That way, loan access for students will be assured, regardless of the outcome of Congress’ deliberations over the President’s proposal, or whatever future economic conditions could occur that might affect FFEL lenders’ ability to fund loans without government intervention. 

 

If we all take prudent action, I am confident we can achieve our shared goal of ensuring that every eligible student in this country has access to the dependable student aid they need to pay for college and pursue their dreams.

 

Sincerely,

 

George Miller  Ruben Hinojosa

###

 

According to the report, the College Board’s annual review of trends in college pricing and student aid, the number of students receiving Pell Grants in 2008-09 rose to 6.1 million, up from 5.4 million the year before.

The report also shows that federal student loan borrowing options remained readily available for students throughout the economic downturn. While private student loans comprised 25 percent of all student loan borrowing in 2007-08, it decreased to just 13 percent of all borrowing in 2008-09. More students borrowed unsubsidized federal student loans, which carry lower interest rates and more favorable terms and conditions than private loans.

Miller is the author of the Student Aid and Fiscal Responsibility Act, legislation the House passed in September that will invest $87 billion in college aid and President Obama’s other education priorities at no new cost to taxpayers. The bill pays for itself by making long-overdue reforms to the student loan programs that will guarantee families access to reliable, low-cost federal loans in any economy. The Senate is expected to consider similar legislation soon. For more information, click here.

In the last Congress, Miller also authored several laws that made college more affordable, strengthened consumer protections for borrowers of both federal and private student loans, and protected federal student loans from turmoil in the financial markets. For more information on those laws, click here.

“Like many of the last few NAEP reports, there is reason for praise and reason for pause. It is encouraging that eighth grade students are making strides, which we should try and replicate but it is alarming and unacceptable that for the first time in 19 years, our fourth graders have not made any yearly gains in math.  Math helps students develop both basic and more complex problem solving and critical thinking skills -- skills that students need to compete with their international peers and to succeed today and in the jobs of the future,” said Miller. “This report also underscores the need to ensure that all students -- especially poor and minority students -- have access to excellent teachers who are well-trained in the fields they are teaching. Many math classes in schools with high concentrations of poor and minority students are taught by teachers who did not major in math or a math-related field. If we are serious about creating a strong workforce and lasting economic growth, we have to make sure our students have a solid foundation in math. This report should serve as a wakeup call to how much work lies ahead.”

 “We have all the reports we need to know that our nation’s students significantly lag behind others in math and science education. Rather than analyze another report, we need an ‘all hands on deck mentality’ to provide students with a first-rate math and science education,” said Holt, who worked with Chairman Miller to establish the TEACH grants program, which provides up to $16,000 over four years in college aid to students who commit to teaching science, math, and foreign language education.

The Education and Labor Committee recently held the first in a series of hearings to examine how to ensure equal access to effective teachers for all students. To learn more about the hearing, click here.

Congress enacted the TEACH grants program in 2007, as part of the College Cost Reduction and Access Act. The grants provide up-front tuition assistance of $4,000 a year to college students who commit to teaching in high-need schools, in high-need subject areas, like math, after graduation. For more information, click here.

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“In fact, current laws treat student loan borrowers exactly the same as people trying to escape child support payments, alimony, overdue taxes and criminal fines. At a time when we should be doing everything we can to help Americans get a good education and contribute to our economy, people should not be punished for trying to get a college degree.

“Filing for bankruptcy is a last resort for Americans who can no longer manage their debt, in many cases because of a job loss, a death in the family, a major medical emergency, or another catastrophic event. Private student loans – which can carry interest rates as high as 18 percent – are often marketed aggressively to young Americans who may not be able to pay them back. There’s no justifiable reason that the lenders who provide them should be treated any differently than credit card companies, auto finance companies, utility providers, and other creditors.

“With more Americans turning to loans to pay for college in this economy, there’s a growing need to protect students from financially riskier private student loans and predatory lending practices. In 2008, Congress made important strides by enacting long overdue consumer protections for students when taking out and repaying private loans. As this Congress begins to reexamine the way our lending and credit industries operate, we should take the next step by ensuring that the basic protections consumers receive when buying a home, a car, a TV and other forms of credit also apply to private student loans. It’s long past time to end this special giveaway for for-profit lenders – and stop shackling Americans with unmanageable student debt.”

BACKGROUND

In 2008, during House consideration of the Higher Education Opportunity Act, Rep. Danny Davis (D-IL), offered an amendment to treat student loan companies like any other creditor when an individual files for bankruptcy, as they were prior to the 2005 law. Miller supported the amendment, but it was defeated.

The Higher Education Opportunity Act, which was signed in August 2008, includes new protections for consumers when borrowing both federal and private student loans, including greater transparency and disclosures of all terms and conditions on loans. It also prohibits deceptive marketing practices by lenders. For more information, click here.

“No student in America should have to mortgage their future to get a good education. This legislation provides students and families with the single largest investment in federal student aid ever and makes landmark investments to improve education for students of all ages – and all without costing taxpayers a dime,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the bill. “Today the House made a clear choice to stop funneling vital taxpayer dollars through board rooms and start sending them directly to dorm rooms. This vote was a historic triumph for America’s students, families and taxpayers – and will ensure that their interests never again take a backseat to lenders and big banks.”

“I am proud to support H.R. 3221, a bill that brings much needed relief to our students in a fiscally-responsible way.  It represents an historic investment in our education system, from our youngest students to our adult learners,” said U.S. Rep. Rubén Hinojosa (D-TX), chairman of the Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “I am especially proud that this bill strengthens our nation’s Minority-Serving Institutions, particularly in the STEM areas, so that students can stay in school, graduate and succeed in our global economy.  It does this by investing $2.55 billion dollars in our nation’s Minority-Serving Institutions over a ten year period. We estimate that this funding will reach at least 500 institutions of higher learning.  These investments will create a new generation of workers in STEM fields—professionals that our country desperately needs to remain competitive in the world.”

Similar to what President Obama proposed in his FY 2010 budget, H.R. 3221 will originate all new federal student loans through the Direct Loan program starting in 2010, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to affordable college loans, at the same low interest rates, terms and conditions, no matter what happens in the economy.

The legislation will ensure that all federal student loan borrowers receive the best possible customer service when repaying their loans by forging a new public-private partnership that allows private lenders to compete for contracts to service loans. Additionally, it will ensure that non-profit lenders have the opportunity to continue servicing loans – preserving a role for lenders and maintaining jobs in communities throughout the country.

This simple change will generate $87 billion in savings over the next 10 years, according to estimates from the Congressional Budget Office. The legislation will invest those savings directly in students and families by:

• Investing $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percentage point;
• Investing $3 billion to bolster college access and completion support programs for students;
• Strengthening the Perkins Loan program, a campus-based program that provides low-cost federal loans to students;
• Keeping interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012;
• Making it easier for families to apply for financial aid by simplifying the FAFSA form;
• Providing loan forgiveness for members of the military who are called up to duty in the middle of the academic year.
• Investing $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate; and
• Investing $10 billion to build a world-class community college system that prepares students and workers for the jobs of the future – and jobs in high demand by local employers – by incentivizing community colleges to partner with businesses, job training and adult education programs.

In addition, the Student Aid and Fiscal Responsibility Act will direct $10 billion of these savings back to the U.S. Treasury to help cut entitlement spending.

It will invest over $4 billion for school modernization, renovation and repair projects that will help improve school buildings across the country and help the nation transition to a clean energy economy.

And it will also invest $1 billion per year over eight years to help ensure that the next generation of children can enter kindergarten with the skills they need to succeed in school.

Building on proposals included in President Obama’s 2010 budget, the bill establishes the Early Learning Challenge Fund, a competitive grant program that challenges states to build a comprehensive, high-quality early learning system for children from birth through age five.

To view a summary of the legislation, click here.

For more details on:

• How this legislation will help students and families.
• For more details on converting to Direct Loans.
  
• For more details on how this bill will strengthen community colleges.
• For more details on investments in early education.

A diverse coalition of organizations, including student groups, early education advocates, and business organizations, support the Student Aid and Fiscal Responsibility Act. To view their letters of support, click here. To view a statement by President Obama in support of the bill, click here.

To view a myth-fact sheet on this bill, click here.
 

First, it will help us reach President Obama’s goal of once again leading the world in college graduates by making college more affordable.

We’ve seen what happens when we have an economy built on credit.

For the past few decades, Americans have gone into severe debt to meet rising costs – especially to pay for college.

Over the last year, escalating tuition prices and college loan payments have become even more burdensome in light of lost jobs, incomes and benefits.

Today we have the chance to make the single largest investment in grant aid and other benefits to help more students graduate with less debt, all within the PAYGO rule, while also cutting entitlement spending by $10 billion over 10 years.

These are smart, strategic investments done in a fiscally responsible way.

H.R. 3221 invests $40 billion to increase the maximum Pell Grant scholarship award to $5,500 in 2010 and to $6,900 by 2019, linking it to match cost of living increases.

It simplifies the FAFSA form to make it easier to apply for federal student aid.

It builds on our previous work to make interest rates on need-based federal loans affordable by making these rates variable beginning in 2012 – when they are set to jump from 3.4 to 6.8 percent.

It expands students’ access to low-cost Perkins loans.

But ensuring access and affordability is only one part of the equation.
Students need both the means to attend college – and the support to complete it.

For example, this bill invests $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions, to provide students with these supportive services.

It also invests $3 billion in the College Access and Completion Challenge Fund, to help colleges develop or enhance innovative programs that improve financial literacy and college completion rates.

I’d like to thank Mr. Bishop, Mr. Hinojosa, Mr. Petri, and many other members of our committee for their hard work on these provisions.

Second, this legislation makes an unprecedented $10 billion investment to make community colleges part of our economy’s recovery.

For years, business leaders have told us there weren’t enough workers with the knowledge and the expertise for their specific industries.

Community colleges can play a significant role in addressing this shortage.

This bill will help us build a 21st century workforce by strengthening partnerships among community colleges, businesses and job training programs that will align community college curricula with the needs of high-wage, high-demand industries.

It will provide community colleges with the tools to replicate programs that are successfully educating and training students and workers for these skilled jobs.

And it will fulfill an important priority for the business community who has continually understood the value community colleges have in training a highly-skilled workforce and helping meet local employment needs.  

That’s why this historic initiative has strong support from the business community, including the Business Roundtable.

H.R. 3221 also recognizes that creating better educational opportunities demands that we invest in our students long before they reach college. Ms. Hirono has provided a lot of leadership in this area – and I’d like to thank her for helping us craft this part of the bill.

Today, almost 12 million children under 5 regularly spend time in child care.

Yet, despite the fact that children’s early experiences have lasting effects on brain development, learning, and success, our nation hasn’t adequately invested in early learning opportunities.

Federal and state policies leave families with a patchwork system of children care with mediocre quality.

And by age 4, children from low-income families are already 18 months behind their more advantaged peers.

Economists, business leaders, and experts agree that smart investments in early education are vital to closing the achievement gap and preparing children to thrive in school and in life.

This bill heeds that advice. It invests $8 billion over 8 years in competitive grants to challenge states to transform early learning practices and build comprehensive high-quality early learning systems for children from birth to age 5.

To qualify, states will have to demonstrate progress on major reforms by:
 

• Building an effective and well-compensated early childhood workforce;
• Integrating key quality standards;
• Improving instructional practices, and
• Better supporting parents in the early education of their children.

Finally, this legislation ensures that every student can learn in a safe, healthy, energy-efficient and modern classroom by renovating and repairing our nation’s schools – provisions that have long been championed by Mr. Chandler, Kildee and Loebsack.

This is a measure that the House has already voted to support, but not to fund.

Not only will this improve the quality of education for our children, it will bolster our economy by supporting new jobs in the construction industry.

All of these reforms are paid for – at no cost to taxpayers – by making common-sense changes to our student loan programs that will achieve two crucial goals at once.

By converting all new federal student loans to the Direct Loan program starting in July 2010, we will finally end wasteful taxpayer subsidies that are keeping a broken system afloat.
We will also insulate all federal college loans from future turmoil in the financial markets.

Students will have access to the low-cost loans they need, in any economy.

Our bill also upgrades the customer service borrowers receive when repaying their loans.

Rather than force private industry out of the system, we maintain jobs and a role for lenders and non-profits by allowing them to compete for contracts to service these loans.  

This simple change will save $87 billion over ten years.

And, as part of our efforts to invest in a brighter future for our children, we will direct $10 billion of these savings to reduce entitlement spending.

The choice before us is clear. We can either keep sending these subsidies to banks – or we can start sending them directly to students.  
                                                                                
No child in America should have to mortgage their future to pursue their dreams.

This legislation will help us rebuild an economy where every child can enjoy the promise of equal opportunity, become part of our middle-class and fulfill their own American Dream.

I urge all my colleagues to support it.

The Student Aid and Fiscal Responsibility Act will allow us to invest $87 billion to make college more affordable, to build a world-class community college system, to improve opportunities to help our youngest students succeed, and to pay down our deficit.

For the many college students paying close attention to this bill, let me be specific about what our reforms mean for you:

More help covering your tuition and expenses, including historic investments in the Pell Grant scholarship; Better opportunities to prepare for good, 21st jobs; and Financial aid programs that are simpler, reliable, and operate in your best interest.

Now we’ll be able to do this at absolutely no cost to taxpayers, by undertaking long overdue student loan reforms.

The Student Aid and Fiscal Responsibility Act is a win-win.

It will guarantee students dependable access federal college aid, and make these programs more effective and efficient for families and taxpayers.

It will save $87 billion over 10 years that we will invest toward rebuilding an economy that is cutting edge, innovative, and will help regain our global leadership.

All of these investments are key priorities of President Obama’s. And I’d like to thank him and Secretary Duncan for recognizing this can’t-miss opportunity to do the right thing for students, for taxpayers, and our country.

No student in this great country of ours should have to mortgage their future to pursue their dreams. Many of the students with us today – like so many other millions of Americans – have.

Let’s remember whose voices really matter here. It’s time to listen to our students and vote to stand on the right side of history.

The legislation will generate almost $100 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, create a more reliable and effective financial aid system for families, and enact President Obama’s key education priorities.

“Vice President Biden knows that students and families deserve reliable, affordable and efficient federal student aid programs, especially at a time when both tuition and enrollment are on the rise,” said Miller. “As Vice President Biden rightly acknowledged, transforming our financial aid system by putting students ahead of banks, and by making it easier for students and families to apply for financial aid, is a better deal for families and taxpayers. In the coming weeks, the House will vote to make these important, commonsense proposals a reality for millions of students and families.”

For more information on the specific provisions of the Student Aid and Fiscal Responsibility Act of 2009 mentioned in Vice President Biden’s speech, including Free Application for Federal Student Aid (FAFSA) simplification and more, click here.

Much to the Republicans’ chagrin, CBO has officially estimated that this legislation saves $87 billion over 10 years.

“It’s unfortunate that the Republicans are choosing to spend their time conjuring up cheap political tricks rather than working to help students and families in a very difficult economy,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the legislation. “Their first desperate attempt to mislead the public didn’t work yesterday, and it won’t work today. Students, families, and taxpayers aren’t fooled – they know that this bill will make historic investments to make college affordable and that it’s completely paid for.”

All of the student aid programs included in the Student Aid and Fiscal Responsibility Act are mandatory and will end at the dates specified in the bill. Any additional funding for these benefits would also have to meet pay-as-you-go budget requirements, which require that any new spending be paid for.

Even though the Budget Committee has said that the programs in HR 3221 do indeed end at the dates specified in the bill, the Republican analysis released today asked CBO to hypothetically score the cost of these programs if they didn’t expire, as the legislation requires.

To view the official CBO estimate of this bill, click here.

For more information on the first manipulated analysis released by Republicans yesterday, click here.
 

“It’s clear that Republicans didn’t like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the legislation. “This is nothing more than a desperate attempt to confuse the public and manipulate a clear determination by CBO that switching to the Direct Loan program is the most sound, fiscally responsible policy decision we could make for families and taxpayers. This is yet another predictable political gimmick from a party that is proving that they will do or say anything – no matter how misleading – to block reforms that will make a tremendous difference in improving the lives of America’s families.”

BACKGROUND

There are several factors to keep in mind when reporting on this estimate:

CBO’s official estimate still projects that the Student Aid and Fiscal Responsibility will save $87 billion over 10 years. This alternative estimate does not change the savings the bill will generate, or how those savings will be spent, in any way.

This alternative estimate ignores current student loan market conditions, under which the federal government is currently supporting 60 percent of all federal student lending. This estimate assumes normal credit market conditions, under which the federally guaranteed student loan program functions entirely independently, as it used to. It does not reflect today’s reality: that the federally-guaranteed student loan program is on life support. The federal government, through both the Ensuring Continued Access to Student Loans Act, and the Direct Loan program, is now financing 60 percent of all federal student loan activity. This current ECASLA-supported, federally-guaranteed student loan program is very similar to the DL program – it generates the same cash outflow upfront, but the funds are sent to lenders who then give it to borrowers. If this alternative estimate was based on this current reality, it would likely show a higher market-risk adjusted subsidy rate for the Federal Family Education Loan Program – again reflecting that the program is on life support.

The letter highlights the difference between the streamlined payment structure of DL and the complicated payment structure of FFEL: “In the direct student loan program, the federal government makes a large, one-time outlay for the amount of the loan (net of various fees) and then receives a stream of principal and interest payments over time. In the guaranteed student loan program, the federal government faces a far more complicated set of payments. It does not disburse a principal amount (loans are disbursed by private lenders) but instead receives some up-front fees, makes a stream of subsidy payments (known as special allowance payments) to lenders, partially compensates lenders for loans that go into default and pays certain borrower benefits, in addition to various other receipts and payments.” Again, this does not reflect the additional risk that the federal government currently takes on under the ECASLA program.

Even when using this alternative methodology that lenders and critics of H.R. 3221 favor, this estimate still reinforces that Direct Loans save more money than FFEL loans. “CBO estimates that over the 2010-2019 period, the subsidy cost for each dollar of a guaranteed loan will exceed the subsidy cost for each dollar of a direct loan by between 10 and 20 cents. Generally, in CBO’s estimation, the direct loan program will have a negative subsidy rate (that is the net receipts to the government on a present-value basis are projected to be greater than its disbursements), whereas the guaranteed loan program will have a positive subsidy rate (that is a net cost on a present value basis).”

Even CBO acknowledges concerns with using this alternative estimate; it leaves many questions unanswered about how future credit market turmoil could impact the student loan programs. “The approach does raise some concerns. As the recent financial turmoil has shown risky assets, including student loans, can fluctuate wildly in value. Those fluctuations can lead to large changes in market-based estimates of subsidy rates for student loans from one year to the next.”

Recent history has exposed deep vulnerabilities in FFELP; the Direct Loan program is completely safeguarded from any such market risks. This estimate concedes that future credit fluctuations could have significant impacts on the cost of FFEL subsidy rates. 

“Today’s vote is a vote to put students before banks and to finally ensure that our nation’s financial aid programs operate as intended – in the best interests of students, families and taxpayers,” said U.S. Rep. George Miller (D-CA), the Chairman of the Committee and the author of the bill. “This landmark legislation will help write the next great education legacy for our country. President Obama has rightly called for us to make historic investments to make college more affordable, to empower community colleges to help rebuild our economy, and to prepare our youngest learners to arrive at kindergarten ready to succeed. I hope this Congress will join our Committee in standing with him on the right side of history.”

“This bill goes a long way towards expanding the accessibility and affordability of a college education for students across America” said U.S. Rep. Rubén Hinojosa (D-TX), Chairman of the Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “The bill will streamline the financial aid application process and increase funding for Pell Grants and Minority Serving Institutions, while also helping lower our national deficit.  This bill accomplishes something we can all be proud of.”

Similar to what President Obama proposed in his FY 2010 budget, the bill will originate all new federal student loans through the Direct Loan program starting in 2010, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to affordable college loans, at the same low interest rates, terms and conditions, no matter what happens in the economy.

The legislation will ensure that all federal student loan borrowers receive the best possible customer service when repaying their loans by forging a new public-private partnership that allows private lenders to compete for contracts to service loans. Additionally, it will ensure that non-profit lenders have the opportunity to continue servicing loans – preserving a role for lenders and maintaining jobs in communities throughout the country.

According to estimates from the Congressional Budget Office, the legislation will generate $87 billion in savings over the next 10 years. The legislation would invest those savings directly in students and families by:

• Investing $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percentage point;
• Investing $3 billion to bolster college access and completion support programs for students;
• Strengthening the Perkins Loan program, a campus-based program that provides low-cost federal loans to students;
• Keeping interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012;
• Making it easier for families to apply for financial aid by simplifying the FAFSA form;
• Providing loan forgiveness for members of the military who are called up to duty in the middle of the academic year; and
• Investing $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate.

In addition, the Student Aid and Fiscal Responsibility Act will direct $10 billion of these savings back to the U.S. Treasury to help pay down the deficit. It will invest over $4 billion for school modernization, renovation and repair projects that will help improve school buildings across the country and help the nation transition to a clean energy economy. And it will also invest $1 billion per year over eight years to help ensure that the next generation of children can enter kindergarten with the skills they need to succeed in school. Building on proposals included in President Obama’s 2010 budget, the bill establishes the Early Learning Challenge Fund, a competitive grant program that challenges states to build a comprehensive, high-quality early learning system for children from birth through age five. 

To view a summary of the legislation, click here.

The House Education and Labor Committee has been examining various proposals for student loan reform and seeking feedback from all key stakeholders over the past few months. In May, the Committee held a hearing to examine these proposals, at which the Obama administration, lenders and colleges and universities testified. For more information on that hearing, click here.

“As President Obama has made clear, we have a rare opportunity to make a landmark investment in America’s economic future by making common-sense changes to the way our student loan programs operate,” said Miller. “Students and families need stronger, reliable college aid, our economy needs a highly-skilled, educated workforce, and our taxpayers need policies that make the best use of their dollars. This legislation will help us reach all of these goals by transforming our financial aid system from one that puts banks before students into one that makes paying for college a better deal for families and taxpayers.”

Similar to what President Obama proposed in his FY 2010 budget, the bill will originate all new federal student loans through the Direct Loan program starting in 2010, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to affordable college loans, at the same low interest rates, terms and conditions, no matter what happens in the economy.

The legislation will ensure that all federal student loan borrowers receive the best possible customer service when repaying their loans by forging a new public-private partnership that allows private lenders to compete for contracts to service loans. Additionally, it will ensure that non-profit lenders have the opportunity to continue servicing loans – preserving a role for lenders and maintaining jobs in communities throughout the country.

According to estimates from the Congressional Budget Office, the legislation will generate $87 billion in savings over the next 10 years. The legislation would invest those savings directly in students and families by:

• Investing $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent;
• Investing $3 billion to bolster college access and completion support programs for student;
• Strengthening the Perkins Loan program, a campus-based program that provides low-cost federal loans to students;
• Keeping interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012;
• Making it easier for families to apply for financial aid by simplifying the FAFSA form;
• Investing $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate; and more.

In addition, the Student Aid and Fiscal Responsibility Act will direct $10 billion of these savings back to the U.S. Treasury to help pay down the deficit. It will also invest in early education opportunities and in school modernization projects that will help the nation transition to a clean energy economy. 

To view a summary of the legislation, click here.

For more details on:

How this legislation will help students and families, click here.

For more details on converting to Direct Loans, click here.

For more details on how this bill will strengthen community colleges, click here.

For more details on investments in early education, click here.

To view a myth versus fact sheet on this legislation, click here.

To view the numerous and varied supporters of this legislation, click here.

The House Education and Labor Committee has been examining various proposals for student loan reform and seeking feedback from all key stakeholders over the past few months. In May, the Committee held a hearing to examine these proposals, at which the Obama administration, lenders and colleges and universities testified. For more information on that hearing, click here.

Under IBR, borrowers have a portion of their income protected from loan repayment (up to 150% of the poverty level for their family size) which means graduates can afford to take jobs at lower salaries.    Borrowers are required to pay no more than 15% of any income above that threshold.  This program will allow borrowers to devote the first part of their paycheck to covering core costs like housing, food and transportation.  After 25 years of lower payments, borrowers’ remaining loan balances, including interest, will be completely forgiven. For borrowers in public service fields, like nursing, public interest law, or non-profit work, their debts will be completely forgiven after 10 years of service and loan payments.

The chart below illustrates the IBR benefits.


SOURCE: Department of Education: http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp


Income Based Repayment was enacted by the 110th Congress in 2007, as part of the College Cost Reduction and Access Act.  That bill invested an additional $20 billion in federal college aid for families at no additional cost to taxpayers. In addition to creating IBR, the law also halved interest rates on need-based federal student loans in equal steps over four years – making these loans more affordable for low- and middle-income students. Last July, the first of these four cuts took effect; today the second cut kicks in, as interest rates drop from 6 percent to 5.6 percent. The rate will continue to drop until it reaches 3.4 percent in 2011. Nationwide, about 5.5 million students take out these loans each year.  

As a result of investments made by this law and more recently by Congress and the Obama administration, millions of low-income students will also receive a Pell Grant scholarship of $5,350 for the coming year. This is more than a $600 increase above last year’s award.

To view a fact sheet on these and other benefits, click here.

For more specific information on how the new Income-Based Repayment program will work and who will qualify, click here.

For more information on the College Cost Reduction and Access Act, click here.

In addition to other steps the Department of Education would take to simplify the FAFSA starting this summer, the Obama administration called on Congress to pass legislation that would dramatically cut down the number of questions on the form by allowing students and families to apply for aid using the information on their tax returns.

The proposals announced today build on steps taken by the 110th Congress to streamline the FAFSA and enable the Department of Education to work with the Internal Revenue Service to eliminative repetitive financial aid questions. That law, the Higher Education Opportunity Act, which Miller was the House author of, included the following provisions:

Streamlines the FAFSA Application Process

• Encourages the U.S. Education Secretary to reduce the number of questions on the FAFSA form over the next five years.
• Simplifies the FAFSA re-application process so that applicant can provide update information in subsequent years, rather than re-filing a new FAFSA form.
• Enables the U.S. Department of Education and the Internal Revenue Service to work together to use information the government already has from applicants’ federal tax forms, such as income and asset information.

Provides Families with Early Estimates of College Aid Packages

• Allows students and families to enter information and receive estimates of their Expected Family Contribution as well as their estimated federal student aid packages in the years before they fill out the FAFSA.

Creates an Easier Application Process for Low-Income Families

• Creates a two-page “FAFSA-EZ” form for low-income students and families who qualify for the “auto-zero” family contribution.

The U.S. Department of Education currently operates two programs that provide borrowers with the same federal student loans, and with the same interest rates, terms and conditions.

One is the federally guaranteed student loan program – or FFELP – under which private companies make loans to students and receive federal subsidies. These loans are virtually risk-free for lenders because they get reimbursed by taxpayers when borrowers default on their loans. The other is the Direct Loan program, under which the federal government offers loans directly to students using Treasury capital. It’s the cheaper of the two for taxpayers.

Last year, as the credit markets froze, many lenders had trouble financing their lending activity, putting the loans that millions of students and families were depending on in jeopardy.

To ensure that no eligible student or parent was denied a loan, Congress enacted the Ensuring Continued Access to Student Loans Act. This temporary program allowed the Education Secretary to purchase student loans made by FFELP lenders, but only in a manner that resulted in no additional costs to taxpayers and only if lenders used this capital to continue making new loans to students. The program is set to expire in 2010.

President Obama’s FY 2010 budget proposes increasing the Pell Grant scholarship and other forms of college aid for low- and middle-income students by almost $100 billion over ten years, at no new cost to taxpayers. His plan would be paid for by originating all new federal student loans through the Direct Loan program starting in 2010. According to preliminary estimates by the Congressional Budget Office, this would save $94 billion over the next decade.

“Reliable access to student loans is important not just for our students and their families, but also for our entire economy,” said Robert M. Shireman, the U.S. Deputy Under Secretary of Education. “We have seen the guaranteed Federal student loan system, known as the Federal Family Education Loan (FFEL) Program, come close to collapse this past year. Instead of maintaining this elaborate web of programs designed to prop up the FFEL program, we should originate 100% of new loans through the less costly Direct Loan program.”

Jack Remondi, the Vice Chairman and Chief Financial Officer of Sallie Mae, agreed that whatever policy is pursued, vast changes are needed to stabilize the student loan programs. “Sallie Mae fully supports the Administration’s objectives of assuring stable funding of the federal student loan program while generating tens of billions of dollars in taxpayer savings that can be used to increase need-based grant aid for students, specifically to put the Pell Grant program on stable footing,” he said.

Contrary to claims from critics, it would be fairly easy and inexpensive for colleges and universities that participate in FFELP to switch to Direct Loans, partly because schools would be able use the same on-site system currently used to administer Pell Grant scholarships.

Pennsylvania State University, formerly a FFELP school, switched to Direct Loans last March to protect its 38,000 students’ access to loans amidst the credit crunch.

“Direct Loans offered a logical alternative to the FFEL Program in light of our circumstances,” said Anna M. Griswold, the university’s Assistant Vice President for Undergraduate Education. “It is testimony to the streamlined nature of the direct loan process and the single point of contact model it represents, that we were able to convert fairly quickly. With adequate lead time, even most of the smaller schools will likely find converting to Direct Loans a manageable process.”

She added that Penn State did not have to hire extra staff, or increase its budget resources, during this switch and that Direct Loans offered better loan repayment and loan forgiveness options for students.

Campuses in the California State University System have found it easier for schools to administer, simpler for students and parents, and faster at originating and disbursing loans than FFELP, reported Charles B. Reed, the Chancellor of the system.

“Stability and reliability in a campus’s student loan program is tremendously important to our students and institutions,” he said. “Given this situation, coupled with the ready availability of a proven alternative in Direct Lending, beginning last year I strongly encouraged all of our remaining FFEL campuses to make the switch to Direct Lending.”

The Obama proposal would also maintain a role for the private sector by allowing companies to compete for contracts to service these loans. This competitive bidding process would result in the best customer service for borrowers by harnessing the private sector’s most innovative and consumer-friendly practices.

Miller said the committee will continue to closely examine proposals to determine the best policy for students, families and taxpayers.

To view all of the testimonies from today’s hearing, click here.

For more information on President Obama’s proposal, click here. ###

The lawmakers highlighted the benefits today – almost a month and a half early – to increase public awareness as students prepare to graduate college and families work to finalize their financial aid award packages for the coming year.

“With graduation season here and families currently weighing next year’s financial aid packages, it’s critical for students, families and workers to know – right now – that additional relief is on the way,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the law. “Every little bit of help counts in this economy. These benefits will make a serious difference for college students and borrowers working hard to pay for college or pay down their student loan debt.”

“The federal government must help colleges and universities continue to prepare people to enter the work force and ensure that higher-education institutions remain economic engines for their communities and regions,” said U.S. Rep. Tim Bishop (D-NY), a member of the committee and a former college provost. “The dream of a college education is dependent upon access and affordability, both of which should be pillars of our long-term economic recovery plans.”

Of the 1.2 million jobs lost last year, 60 percent were held by workers aged 25 or younger. Their wages may also suffer: Economists have found that workers who graduated during recessions typically earn less over a lifetime than workers who graduate in better economic times. Many borrowers already spend high percentages of their paychecks making student loan payments – and it’s only likely to get worse.

Beginning July 1, for the first time, students and borrowers will be able to participate in a new Income-Based Repayment program that caps their monthly loan payments at just 15 percent of their discretionary income. Any current or future borrower whose loan payments exceed 15 percent of their discretionary income will be eligible. After 25 years in the program, borrowers’ debts will be completely forgiven.

Other benefits include:

• Cheaper interest rates on need-based (subsidized) federal student loans. On July 1, interest rates on these loans will continue to drop, from 6 percent to 5.6 percent. This is the second of four annual cuts in this interest rate; it will continue to drop until it reaches 3.4 percent in 2011. Nationwide, about 5.5 million students take out subsidized student loans each year.

• Higher Pell Grant scholarships for low- and moderate-income students. Due to funding boosts provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant scholarship for the 2009-2010 school year will be $5,350 – more than $600 above last year’s award. About 6 million students receive this scholarship each year.

 
In addition, students and borrowers will be able to continue to take advantage of other recent programs enacted under the law that will make it easier for graduates to go into public service fields while grappling with student debt.

To encourage more students to become teachers, the law provides up-front tuition assistance, known as TEACH Grants, of $4,000 a year – for a maximum of $16,000 – to students who commit to teaching high need subject areas in high need schools for four years after graduation. (These grants first went into effect for the 2008-2009 school year.)

Graduates who enter into public service careers, such as teachers, public defenders and prosecutors, firefighters, nurses, non-profit workers and more, will be eligible for complete loan forgiveness after 10 years of qualifying public service and loan payments. (This program began on October 1, 2007.)

To view a fact sheet on these various benefits, click here.

For more specific information on how the new Income-Based Repayment program will work and who will qualify, click here.

For more information on the College Cost Reduction and Access Act, click here.

For more information on the American Recovery and Reinvestment Act, click here.

“I also applaud President Obama, and Secretaries Duncan and Solis for launching a new user-friendly website to help Americans understand and take advantages of these various student aid benefits. Their proactive leadership will open up new opportunities that will empower students and workers to become part our nation’s recovery.  I look forward to working with them to continue making college more affordable and getting our economy back on track.”

Currently, jobless Americans who receive unemployment benefits cannot keep those benefits if they go to college and receive federal financial aid. President Obama’s proposal will allow these workers to maintain those benefits if they enroll in college. As part of the American Recovery and Reinvestment Act, Congress increased the Pell Grant scholarship to $5,350 for the 2009-2010 school year – an increase of more than $600 its current level.

Under current law, financial aid offers are allowed to use unemployment benefits as proof that a family’s job status has changed, even if their financial aid forms list an old income level, and adjust their student aid award package accordingly.

For more information, visit www.opportunity.gov. 

“This report confirms our fear that many students – coping with a worsening college cost crisis – may be turning to more expensive, risky private student loans before first maximizing cheaper federal student aid they may be eligible for. These loans pose far greater financial dangers to students than federal student loans and have a history of being marketed to students in deceptive and aggressive ways. At a time when Americans are deeply worried about their economic stability, this data is another urgent reminder that we must do everything possible to make students fully aware of and maximize their federal student aid options, which can reduce debt burdens and default rates.

“It also highlights the need to expand the Pell Grant scholarship and make our federal student loan programs more reliable, sustainable and efficient for students, families and taxpayers. In the coming months, our committee will be focused on making college more affordable and accessible by bolstering and stabilizing the Pell Grant scholarship and ensuring that our federal student loan programs operate as intended – in the best interests of Americans families and taxpayers.”

Miller highlighted recent laws enacted by the 110th Congress that will help encourage students to first maximize their federal student loan borrowing options, that will better protect borrowers against confusing and predatory private lending practices, and that will make federal student loans more manageable to repay.

The Higher Education Opportunity Act, which was enacted in August 2008 and begins to take effect for the 2009-2010 school year, will require lenders marketing private college loans to first inform student of their federal borrowing options and ensure that students are treated more fairly when borrowing both federal and private loans by:

• Ensuring that all federal and private student lenders are up-front about borrower benefits and that private lenders follow all ‘Truth in Lending Act’ provisions;
• Prohibiting lenders from issuing private student loans without first obtaining information on a borrower’s enrollment status, cost of attendance, and remaining financial need after available federal student aid.
• Instilling enforceable marketing protections, including disclosures and notifications, to students and institutions by lenders offering private loans.
• Requiring lenders to fully disclose to borrowers the terms and conditions of private loans at three different stages of the loan application process, including during loan marketing and solicitation.
• Prohibiting private loan lenders from charging borrowers fees for paying off their loans early.
• Requiring lenders to give applicants up to 30 days following the approval of a private loan to accept it with no changes in terms or conditions; and
• Granting borrowers up to 3 days to change their minds after private loan consummation.

 
For more information on these protections, click here.

Recently-released federal data also show that student loan defaults rates are on the rise. The College Cost Reduction and Access Act, enacted in September 2007, established an income based repayment program that will make federal loans more manageable to repay by allowing borrowers to cap monthly payments at just 15 percent of their discretionary income. The program will take effect July 1 of this year; any federal student loan borrower is eligible. For more information, click here.

A separate law enacted last spring, the Ensuring Continued Access to Student Loans Act, also increased the federal college loan borrowing limits to help reduce students’ dependence on private loans. For more information, click here.

“Now more than ever, with millions of Americans losing income and jobs in this economy, students and families need reliable, low-cost federal student loans to help pay for college. The House Budget Committee did the right thing for students, families and taxpayers by passing a budget that will give us the opportunity to make our federal student loan programs more reliable and efficient, while saving billions of taxpayer dollars that could be used to further boost college aid and reduce our deficit.

“This is exactly the kind of investment we should be making, at this moment, to turn our country around. In the short term, it will help make sure the economic crisis doesn’t price qualified students out of a college education. In the long term, it will save taxpayers money and make our nation stronger and more competitive. I hope that the House will swiftly pass this budget, so that we can begin working with the Obama administration to make college more affordable and accessible for millions of Americans – at no cost to taxpayers.”  

One student loan reform option that could be explored is President Obama’s proposal to use federal funds to originate all new federal college loans beginning in the 2010 school year. New estimates released last week by the Congressional Budget Office show this proposal will save taxpayers almost $100 billion over ten years – close to a $50 billion increase over previous estimates by the Office of Management and Budget. Specifically, the proposal will save taxpayers $47 billion over 5 years and $94 billion over ten years.

To view the CBO estimate, click here.

For more information on President Obama’s proposal, click here.

“I am thrilled that President Obama has nominated Gaby to be Assistant Education Secretary. Over the past three years, she has helped Congress enact some of the most significant changes to higher education policy in history, including increasing $20 billion in college aid for students and families, cleaning up shady practices in the student loan industry, and modernizing our higher education program. She has been a top-notch advocate for our nation’s college students and families and will bring the same expertise, energy and heart to the Education Department. I look forward to working with her,   Secretary Duncan and the Obama administration to rebuild our economy and middle class by strengthening educational opportunities for all Americans.”

“President Obama made it very clear that we should review every program to make sure that its operating in the best interests of taxpayers and that we should eliminate excess waste wherever we find it. The President’s proposal to save taxpayers almost $50 billion within the higher education programs while increasing benefits for students will be seriously considered by Congress.

“Today he has put forth a solid plan to make federal student loans more reliable, while saving taxpayers billions of dollars, and to ensure that the value of the Pell Grant scholarship reflects families’ increasing financial burdens.

“In today’s economy, we must do everything we can to make sure that the federal student aid programs that students and families depend on are as reliable and efficient as possible. I look forward to working with him and Secretary Duncan to make college more affordable and accessible for every qualified American who wants to attend.”

BACKGROUND

Among other things, the President’s budget proposes:

FEDERAL STUDENT LOANS: There are two types of federal student loans: the Direct Loan Program (where loans are made directly to students by the government) and the Federal Family Education Loan Program (when loans made by private lenders are guaranteed by the federal government). Both types of loans carry the same interest rates and terms for students, but the Direct Loan program is less expensive and yields significant taxpayer savings.  For more information on these programs, click here.

President Obama proposes that, beginning in 2010-2011, all new student loans would be originated through the Direct Student Loan program. The Office of Management and Budget estimates this would save taxpayers $24.3 billion over five years and $47.5 billion over ten years by making the program more efficient.

PELL GRANT SCHOLARSHIPS: The President also proposes to index the maximum Pell Grant scholarship award to the Consumer Price Index plus one percent, which will better reflect the economic realities students and families face.

President Obama has already enacted a substantial investment in k-12 and higher education in his economic recovery plan, including a significant $500 increase in the Pell Grant scholarship for students next year.  When combined with other increases enacted during the 110th Congress, by 2010 the maximum Pell Grant award will have increased by $1,500 – or 37 percent – since Democrats regained control of the Congress. For more information, click here.

Additional media articles about President Obama's proposed changes to the direct lending program

U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, today said that the law’s higher education benefits are an important down payment on President Obama’s goal of making college more affordable and accessible.

“President Obama’s economic recovery plan is a victory for college students and their families,” said Miller. “A sustainable economic recovery depends heavily on guaranteeing that our students can continue to have access to an affordable college education. This law will provide some much-needed relief to millions of students struggling to pay for college while their families are losing jobs, income and financial security.”

The law will provide immediate relief for college students in several ways:

• Increasing the Pell Grant scholarship by $500. The bill increases the maximum award to $5,550 by next school year and to $5,000 for 2010. When combined with other increases enacted during the 110th Congress, the maximum Pell Grant award will have increased by $1,500 – or 37 percent – since January 2007.. About seven million students would benefit from this increase.
• Establishing a new college tuition tax credit of $2,500. The bill establishes a new, partially refundable “American Opportunity” tax credit, expanding access to a higher education tax credit to about four million students.
• Creating new work-study opportunities for college students. The bill invests $200 million in work-study opportunities for college students, creating jobs for an additional 133,000 students.

These investments will also bring direct benefits for local economies across the country. College and universities create jobs, support taxes and generate spending on goods and services in states and communities. For example, colleges and universities in the Atlanta area supply 130,000 jobs and contribute $10.8 billion annually to the state’s economy. Each year, the University of Houston system generates over $3 billion in local economic activity and 24,000 local jobs. And in 2006, Nebraska’s 14 private universities and colleges spent about $521 million on goods and services – generating another $900 million in spillover effects for a total estimated benefit of $1.42 billion to the state’s economy.

Increasing student aid will help more students stay in college and more new students enroll in college – which in turn will help colleges and universities keep more jobs on the payroll and continue to serve as local economic engines.

For more information on student aid and other provisions included in the American Recovery and Reinvestment Act, click here.

The American Recovery and Reinvestment Act, H.R. 1, which passed the House by a vote of 244 to 188 would increase the Pell Grant scholarship to its highest amount ever, and create a new tuition tax credit for families.

“A long-term recovery falls not only on the shoulders of today’s workforce but also tomorrow’s,” said U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee. “This economic crisis is putting enormous pressure on families’ wallets, and making it much, much harder for students to pay for college. We can’t allow this downturn to put an entire generation of students’ dreams of getting a college degree further out of reach.”

The legislation will provide immediate relief for college students in several ways, including:

• Increasing the Pell Grant scholarship by $500. The bill increases the maximum award to $5,350 by next school year and to $5,550 for 2010. This brings the total Pell Grant funding increases to $1500 – or 37 percent – since the Democrats first regained control of the Congress. About seven million students would benefit from this increase.
• Establishing a new college tuition tax credit of $2,500. The bill establishes a new, partially refundable “American Opportunity” tax credit, expanding access for higher education tax credit to about four million students.
  
• Creating new work-study opportunities for college students. The bill invests $490 million in work-study opportunities for college students in fields related to their major or in community service, creating jobs for an additional 200,000 students.

 For more information on student aid and other provisions included in the American Recovery and Reinvestment Act, click here.

“Senator Pell was an exemplary public servant and a true champion for students and young Americans. His vision of a college education for every American transformed our financial aid system and paved the way for millions of students to achieve their dreams. His strength, wit, and unyielding determination led to the creation of what we now aptly call Pell Grant scholarships – grants that have helped make college more affordable and accessible for countless low- and moderate-income students and their families. Senator Pell will be fondly remembered and very sorely missed. In this next Congress, we will honor Senator Pell’s legacy by working to ensure that all students have the opportunity to obtain a college degree.”

For more information about Pell Grants and key legislation regarding higher education passed in the 110th Congress, click here.

“For months now, while federal student loans have remained readily available due to swift and prudent action by Congress and the administration, some students and families have had trouble accessing the additional loans they need to help pay for college. Loans are a critical part of ensuring that students can get a college education and succeed in our 21^st century global economy.  We can’t allow students’ dreams of going to college to be sidelined by the economic crisis"

“We hope that this new program will work as intended: To get credit markets flowing again and make loans more accessible and affordable for students and families. We look forward to learning more details about this proposal so we can be assured that it will operate in the best interests of America's college students, their families and taxpayers.”

Miller is the author of two laws that helped safeguard federal student loans from turmoil in the economy at no cost to taxpayers. Since the enactment of these laws, no student or parent has reported trouble accessing the federal student loans for which they are eligible. For more information, click here.

Miller is also the author of a recently enacted law, the Higher Education Opportunity Act, which provides new protections for students when borrowing private educational loans, including safeguards against deceptive marketing practices, requiring private student loan certification, and prohibiting lenders from penalizing borrowers for paying off their private loans early. For more information, click here.