By Kimberly Chin
The Student Cost Reduction Act, passed in the Senate earlier this month, will cut federal subsidies to student loan programs and focus more money in federal grants to students in the low and middle income range if signed into law by President Bush.
President Bush is expected to sign the bill Thursday morning, acceding to the bipartisan consensus that overwhelmingly passed it. The White House had previously opposed the House version of the bill. The bill was approved 292-97 in the House and 79-12 in the Senate.
“This will be the single largest legislation in higher education in 60 years, since the GI Bill, which allowed World War II veterans to go to school,” U.S. House Majority Leader Steny Hoyer said in a phone conference last week. The bill was their goal for the first 100 hours of congressional business for the house. It was passed by both Houses after contentious debate.
Democratic Representatives Tim Bishop (N.Y.), Jason Altmire (Penn.), Chris Murphy (Conn.) and John Sarbanes (Md.) joined Hoyer in discussing the legislation with student journalists in the Mid-Atlantic and Northeast.
Aimed at lowering the cost of higher education, the major groundwork of the bill will make repayment on federal student loans easier for students. The bill will cut interest rates to 3.4 percent, cutting the old rate in half over the course of five years.
About $11.4 billion will be redirected from subsidies normally given to student loan programs and banks into federal Pell grants over the next five years. The Pell grants will allow low- and middle-income students to receive a maximum of $5,400, up from $4,500, according to the US Department of Education’s end-of-year report. New York students are expected to receive $2 billion from the act.
Hoyer said the bill comes at “no new cost to taxpayers.” To pay for the increase in grants, about $20 billion of revenue from existing taxes will be withdrawn from lender companies and rerouted to federal grants. This bill “not in any way impedes or undermines a banks willingness to give loans because after all, these are guaranteed loans,” Hoyer added.
“As a person who spent most of his adult life on a college campus, this is a welcome legislation and legislation that will be of enormous benefit for students,” said Bishop, who is also a former provost of Southampton College.
“More than 48,000 students are taking need-based loans each year at a 4-year public school,” said Hoyer.
There have been changes in the requirements of those who will receive aid from the new act. “We’ve also increased the income by which a family can qualify for a national Pell grant,” Bishop said. The current qualifications for a Pell grant are an Expected Family Contribution of $20,000. The bill increased the EFC to $30,000.
Bishop also spoke regarding the income potential allowance, which means “students can make more money in the year and can have that increased income shielded from a determination of their ability to contribute to the cost of attendance.” In the past, students have had struggled to maintain an income that was just low enough to continue to receive financial aid. If they had a source of income that was remotely higher, this would lead to the withdrawal of financial aid.
The bill “restores the balance to this grossly unfair student loan system,” Sen. Ted Kennedy (D-Mass.) told the New York Times. Some lendersfeared that the cuts would cause them to lose business and render them unable to keep up with their services to students.
Marc Goldsmith, a senior finance major, believes the bill makes sense. “There’s a bit of a crisis in the market with sub-prime loans, which is affecting everything else. I can understand why Congress would do that,” Goldsmith said, adding that it might be upsetting for students who rely on loans.
“Every advisor indicated that lenders were greatly over-subsidized,” said Hoyer.
The bill aims at helping graduates as well as undergraduates, especially those who work in public service. They have provided “up-front tuition assistance” for students wishing to pursue the education profession. In return, teachers are asked to teach in impoverished communities or high-need subject areas. It will cut monthly student loan payments down to 15 percent of disposable income.
The bill offers loan forgiveness as an incentive for students wishing to be law enforcement officers, firefighters, those going in the medical field, public defenders, as well as others entering public service. Eventually, the House plans to lower the time period allowed for public service employees to receive loan forgiveness.
“This is an outstanding piece of legislation,” said Rep. Altmire. “It shouldn’t be underestimated the impact that it has on people’s lives, for both students who are taking on this debt right now and families who are helping their children pay for college.”

The Student Cost Reduction Act aims at reducing some of the struggle among college students to maintain financial stability while paying for college.