As college students around the country begin to fill out their FAFSA forms and graduating seniors grow more nervous about the magnitude of their debt, the U.S. House of Representatives overwhelmingly passed a measure yesterday to decrease interest rates on some student loans. While the legislation would be welcomed by students who could save money on interest payments, the resolution fails to truly address the increasingly unaffordable price of higher education.
Some lawmakers, like Sen. Edward Kennedy (D-Mass.), have argued that the House bill doesn’t go far enough, and they’re right. When this measure comes before the Senate, senators must reinforce the government’s commitment to need-based financial aid by increasing funds for grants, expanding interest-rate cuts and loosening the requirements to receive need-based aid to account for special financial circumstances that the current system overlooks.
The House’s College Student Relief Act slashes the interest rates on some loans from 6.8 percent to 3.4 percent over a five-year period. The bill gives an estimated $6 billion back to student loan programs after the $12 billion cut by the Republican-led Congress last year. To make up for this increased spending, the bill also cuts the amount banks receive when students default on loans, increases bank fees and reduces the government’s guaranteed yield to banks for contributing to student loan programs. However, the interest-rate cut only applies to federally subsidized Stafford loans, and the bill fails to mention any grants.
Over the last five years, tuition costs have risen by more than 35 percent and students are paying for these increases with high-interest loans. The average student owes more than $19,000 by graduation, and many owe more than $40,000. What students need is more grant money, not more suffocating loans. While Democrats are partly honoring their campaign commitment to make college more affordable, they also hinted in their campaign that the maximum Pell grant award would increase from $4,050 to $5,100, something that this bill doesn’t do.
The House bill also fails to cut interest rates for some federal loans, like unsubsidized loans given to needy students. These are the loans that are the most taxing on students because they accumulate interest while students are still in college. This forces students either to work more hours – undermining the education they are paying for – or let the interest accumulate exponentially.
Even the federal financial aid process itself is poorly designed to meet the evolving circumstances that financially burden students. The FAFSA forms students fill out every year rely on equating need strictly from parental income and assets. This process makes it difficult for students who are financing their own education and parents who are struggling to meet their expected contributions while financing the education of several children. Some top colleges around the country, including the University, have already recognized this fallacy and are supplementing FAFSAs of freshmen applicants with the College Scholarship Service Profile, which attempts to more thoroughly evaluate a student’s financial situation in determining need.
Ultimately, the House’s new bill is an improvement on the current situation, but by no means an is it end-all solution to college affordability. Senate Democrats shouldn’t settle for this watered-down version of the promises that were made during the 2006 campaign. If Congress is really committed to helping educate Americans, it should increase grants, include more types of loans in the interest-rate cuts and restructure the system to get money where it’s needed most.