Congress on Friday approved the largest overhaul of education funding in 60 years, slashing subsidies to lenders by $20.9 billion over five years and redirecting the money to boost financial aid to students and reduce interest payments on their loans.
The bill would offer debt forgiveness for students who enter certain public-sector jobs and invest $510 million in minority colleges. The bill’s increases in Pell Grants are expected to benefit roughly 5.5 million needy students nationwide.
Democrats hailed the legislation, describing it as the largest college aid package since the 1944 GI Bill and a boon to families at a time of skyrocketing college costs. But lenders warned that the bill would drive smaller financiers out of business, leaving students with fewer and less-attractive loan options. And Republicans claimed that it would burden taxpayers with costly new entitlement programs.
Despite GOP opposition, President Bush indicated Thursday that he would rescind an earlier threat to veto the bill and sign it into law.
Passage of the College Cost Reduction and Access Act comes as college costs have soared nearly 40 percent in the past five years. It also coincides with increased scrutiny of the $85 billion student-loan industry, which has been shaken by recent scandals involving conflicts of interest among lenders and school officials, as well as kickback schemes.
The bill would halve interest rates for students starting July 1, from a current 6.8 percent to 3.4 percent phased in over four years. Those rates reverse an increase that the previous Republican-led Congress allowed as a way to fund tax cuts. The lower rates would expire after five years unless Congress renews them.
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