House Approves Overhaul of Student Aid Policies

The bill would end a program that subsidizes lenders who offer federally guaranteed student loans.

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The House of Representatives approved legislation Thursday to overhaul the federal government's student lending policies. This is a major legislative victory for President Obama, who considers signing the Student Aid and Fiscal Responsibility Act of 2009 into law a top domestic priority, Inside Higher Ed reports.

If approved by the Senate, the student aid bill will cease all lending from the bank-based Family Federal Education Loan Program and reroute the savings from this shift to a wide range of programs, including some outside of higher 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," Rep. George Miller, chairman of the House Education and Labor Committee, said in a news release. "Today the House made a clear choice to stop funneling vital taxpayer dollars through boardrooms 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 back seat to lenders and big banks."

Among other things, the legislation would:

  • Provide $40 billion over 10 years to increase the maximum Pell Grant to $5,550. The maximum grant level would increase annually by the rise in the Consumer Price Index plus 1 percent.
  • Greatly expand and alter the criteria for the Perkins Loan Program.
  • Pour $10 billion into community colleges to support Obama's American Graduation Initiative, designed to produce 5 million more two-year college graduates by 2020.
  • Spend $8 billion over 10 years to strengthen early childhood education.
  • Create a College Access and Completion Fund that would give grants to states and institutions that have innovative approaches to increase the number of students going to college and their graduation rate.
  • Provide $4.1 billion to modernize and repair school and college facilities, including those damaged by Hurricanes Katrina and Rita.
  • Make the interest rates on federal student loans variable, beginning in 2012. They are set to rise to 6.8 percent that year.
  • Simplify the federal financial aid form.
  • Many lenders oppose the proposal to end lending through the FFEL program, saying the change will eliminate jobs and competition. Though Democrats claim the bill had bipartisan support, it garnered just five Republican votes in the 253-to-171 tally in the House.

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