October 15, 2007
Who will the College Cost Reduction Act really affect?
The Chicago Sun Times has a great article on the COllege Cost Reduction Act, and what most Amreicans are likely to see as a result. Read an excerpt below.
While the headlines sound great, the actual benefits will affect relatively few students. Pell grants made to the lowest income students increase from $4,310 in 2007 to $5,400 by 2012 — an additional $11 billion in funding over the next five years.
But rate reductions on subsidized Stafford loans will phase in only for new loans made after July 1, 2008 — and don’t apply to existing loans, unsubsidized loans or loans made to graduate students.
Similarly there are restrictions on offers such as “Teacher Grants” — a program that gives $4,000 per year (with a maximum of $16,000 for undergrads) to those who agree to serve as full-time teachers in certain disciplines for at least four years in a “high-needs” school, and loan forgiveness programs for grads employed in public service jobs.
Unfortunately, the same bill reduces certain federal subsidies to lenders.
Lenders who will face a squeeze on profits because of reduced payments from the government to subsidize their activities are already taking action, according to Kevin Walker, CEO of SimpleTuition.com.
“We’re finding, in general, that many lenders have had to cut back on incentives such as interest rate reductions and principal reductions for on-time payments, since the loans are no longer as profitable.”
The real story behind these headlines is the fact that many are suddenly waking up to the fact that college has become unaffordable. Middle-income parents despair of receiving financial aid. Students graduate with huge debt burdens — larger than their parents’ original mortgage.