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Student Loan Reform Changes Necessary To Avert Pell Grant Crisis, Advocates Say

House approval of a student loan reform plan will help alleviate a potential crisis in the Pell Grant program as growing numbers of low-income students seek to access the program during this recession, higher education advocates say.

“If this financial package does not get passed, we’re looking at a catastrophic situation,” said Rich Williams, higher education advocate for U.S. PIRG. As more students return to school or continue their educations, the Pell Grant program faces a shortfall of $13 billion and growing.

In addition, Pell Grant increases contained in the 2009 economic stimulus bill are at risk without congressional action on the loan reform plan. As passed by the House on Sunday, student loan reforms would generate about $36 billion for Pell, enough to pay off the shortfall and sustain grant increases through 2017.

Financial aid experts also endorsed the move, noting the Pell shortfall and the large increases in the number of eligible students represent a serious challenge for the program. “These developments threaten to drastically reduce students’ Pell Grant awards and ultimately their ability to pursue their higher education goals,” said Joan Crissman, interim president of the National Association of Student Financial Aid Administrators.

The House-approved bill would “set the program on a firm financial foundation” for the future, she said.

In a rare Sunday night session, the House approved a large budget reconciliation bill that would end federal student loan subsidies to banks and reallocate much of the savings to financial aid. These provisions are part of a bill that also contains House recommendations on comprehensive health care reform.

The reconciliation bill represented the second of two major votes Sunday. In the first vote, the House approved a comprehensive health bill cleared earlier by the Senate. But since some members object to provisions of the Senate bill, House lawmakers also approved a quick fix-it—the reconciliation bill—and added in student loan reform as well.

“Today we are investing billions of dollars in affordability and accessibility for students,” said Rep. Ruben Hinojosa, D-Tex., chairman of the House higher education subcommittee, just before the Sunday night vote.

While shoring up Pell, the measure also includes:

  •       $2.55 billion for minority-serving institutions, including historically Black colleges, Hispanic-serving institutions and tribal colleges
  •       $2 billion in competitive grants to community colleges
  •       $1.5 billion for a program to help borrowers by allowing them to repay loans based on income
  •       $750 million in new grants to promote college access and completion

By ending subsidies to banks, the legislation would require colleges and students to use Direct Loans issued by the federal government. This would save the federal government about $61 billion over 10 years. The savings not re-programmed to higher education would help pay for health care reform and reduce the federal deficit.

Given new fiscal constraints as well as the mounting Pell Grant shortfall, House lawmakers dropped most provisions of the American Graduation Initiative (AGI), an Obama education priority that would have provided even more money for community colleges. Nonetheless, the American Association of Community Colleges is supporting the measure. “We’re happy with it,” said David Baime, AACC vice president of government relations.

Leaders of MSIs also praised the bill for provisions funding HBCUs, HSIs and tribal colleges. “It lays the groundwork for better access to college for Hispanic students and for stronger STEM [science, technology, engineering and math] programs at Hispanic-serving institutions,” said Dr. Antonio Flores, president of the Hispanic Association of Colleges and Universities.

While most of Sunday’s debate focused on health care, some members of both parties cited the implications for education. Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, said the reconciliation bill would provide “the single largest change in college affordability ever—at no cost to taxpayers.”

But Rep. Brett Guthrie, R-Ky., blasted Democrats for “using student loan dollars to fund this health care bill.” As a result, he said, the legislation would “put it [the health care bill] on the backs of our students.”

The Senate is expected to take up the budget bill soon and higher education advocates hope the chamber will schedule a vote later this week.

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