2/16/2005 - Washington, DC - According to the White House, the Administration is committed to providing equal access to higher education and life-long learning through such important programs as expanded loan options and increased grant awards. College costs are rising significantly. As a result, student aid is increasingly important to ensure that students have an opportunity to go to college.
Increasing Pell Awards. This year, the Administration will be working with the Congress to enhance opportunity for students by expanding the Pell Grant program. Pell Grants are the single largest source of grant aid for postsecondary education, and help nearly one-third of all undergraduates afford the cost of college education. To help students keep up with the rising cost of college, the Budget proposes to increase the $4,050 maximum award by $100 in 2006, and $500 over five years, lifting the maximum award to $4,550. The Budget also retires the $4.3 billion Pell Grant shortfall, which has been a major obstacle preventing increased awards for the more than five million Pell-eligible students. In addition, the Budget proposes to make larger Pell awards available both to students who accelerate their studies by attending school year-round and to many active duty military personnel. The Budget’s Pell Grant proposal is part of a larger package of reforms intended to modernize and improve the Federal student aid system.
Reforming Student Loans. The Administration is strongly committed to the lender-based guaranteed Federal Family Education Loan program and expects it to continue as the primary source of loans to students in the years ahead. In addition, the Administration will continue to maintain a strong Direct Loan program to ensure that no eligible student is denied access to student loans in the event a student or school cannot find a suitable lender.
However, problems in the structures of the current student loan programs prevent them from meeting all their policy and program objectives. Specifically, the Federal Government assumes almost all of the risk for the loans, while Federal subsidies to intermediaries—lenders and guaranty agencies—are set high enough to allow the less efficient ones to generate a profit. These problems lead to unnecessary costs for taxpayers and prevent the program from achieving the efficiencies the market is designed to provide.
The Budget proposes a comprehensive package of reforms to make the student loan programs more efficient, cost-effective vehicles for helping students finance their postsecondary educations. These reforms will link subsidy payments for lenders and guaranty agencies more closely to their costs and modify interest rates for borrowers who are no longer in school and who have consolidated their loans.
[Note: If you're thinking about consolidating your student loans, you are strongly encouraged to do it now, before you miss out on locking in today's historically low fixed rates for the life of the loan. The Bush budget proposes a change to a variable rate formula. A variable rate means your interest rate may fluctuate year-to-year, thereby increasing your interest fees. Please apply today.]
The Budget achieves $34 billion in savings over 10 years by reducing unnecessary subsidies and payments to lenders, guaranty agencies, and loan consolidators and by placing a larger share of the loan risks on lenders. These savings will be used to increase the Pell Grant maximum award, pay off the current $4.3 billion Pell shortfall, and improve benefits to students in school by increasing loan limits for first year students and extending the current favorable interest rate framework. This package will also include budget scoring rules to ensure that the Pell Grants program is fully funded and shortfalls will not be created in future years. In addition, $10 billion in savings over ten years will be set aside to reduce the Federal budget deficit. |
