College Cost Reduction Act of 2007

The College Cost Reduction Act (H.R.2669) seeks to lower the cost of higher education by reducing lender subsidies by $19 billion and then investing those funds in programs that increase grant amounts to students, improve access to student loans, cut interest rates on student loans, provide for the repayment of parts of the loans through employment or service in areas of national need, and reward colleges for lowering costs to students.

Current status
The bill passed in the House by a vote of 273-149 on July 11, 2007. The Senate received the bill, and passed a slightly different version of it on July 20, 2007. Details of the changes can be found below.





Original bill summary


Student aid
In the bill, Pell Grants are authorized at $840 million in FY 2008 and are set to rise to $2.6 billion by 2017. Individual grant amounts are increased by $200 per year through 2010, $300 per year through 2011 and $500 per year through 2012 and thereafter. Maximum grant amounts per student are $7,600 through 2009, $8,600 through 2010, $9,600 through 2011, $10,600 through 2012 and $11,600 through 2013.

Also, working students can receive support of $3,750 for 2010 and $6,000 by 2013. The amount is higher by about $600 per year for independent students without dependents other than a spouse. Means testing for grants would be simplified and the income threshold would be raised from $20,000 to $30,000.

Affordable student loans
Interest rates on education loans granted after July 1, 2006 are set at 6.8% on the principal balance. The rate is gradually decreased until it reaches 4.4% by July 1, 2012. Federal insurance on student loans is raised from $5,500 to $7,500 with an aggregate cap raised from $23,000 to $30,500 for undergrads and from $65,500 to $73,000 for graduate students. Allowances to lenders, where lenders can profit on the difference between the cost of the loaned money and the interest charged, is reduced to 1.79%. Collection fees are lowered from 23% to 16% of the amount collected. Fees paid by lenders to the government for administering the program are increased slightly from 0.5% to 1.0% on new loans. Non-profit and small lenders are exempt from the fee. Repayment of loans by service can be accomplished through service in an area of national need as long as there is no default on the loan before service. The employer may take over service of the loan or the loan may be canceled depending on the service. Early childhood educators in low-income communities, such as nurses, foreign language specialists, librarians, highly qualified bi-lingual teachers, child welfare workers, speech and language pathologists, and those in national service or public sector employment (police, fire, etc.) can have $1,000 forgiven yearly for five years. Income or financial hardship and post-active duty status can also be taken into consideration regarding loan repayment.

Reducing the cost of college
The bill declares that no state may reduce the total amount it provides for public institutions of higher education for any academic year beginning on or after July 1, 2008, to an amount which is less than the average amount provided during the five most recent preceding academic years. Colleges that do not participate can be fined up to $25,000. Colleges that have a net cost lower than the preceding year can receive a 25% increase to Pell Grant recipients attending that school.

Highly qualified teachers
The bill establishes a program to provide grants to institutions for payment to students pursuing a teaching career. The funds can be used to pay students' tuition, fees, housing, and room and board. Students must maintain a 3.25 grade point average in the first year, and must meet other criteria to qualify. Qualified applicants can benefit from loan tuition assistance of up to $4,000 per year.

Increasing college access
The bill invests in historically African American and minority colleges by providing grants to those institutions to increase enrollment, particularly in the fields of science, technology, engineering, and mathematics, as well as the physical sciences, computer science, and information technology.

House
The bill passed in the House with the above provisions on July 11, 2007.

Changes to the bill
On July 20, 2007, the Senate passed an amended version of the bill. The bill differed from the House version in that it provided for additional grant activity. Students with the greatest need could be awarded a cost of attendance grant based on need minus the expected family contribution and any Pell Grant amounts already awarded.

Also amended were some of the loan forgiveness provisions to detail under what circumstances forgiveness could take place. Also, the provision in the underlying bill that would reduce from 23% to 16% the amount a collection agency could earn on the amount collected is raised to 24% on funds collected between 2003 and September 2007 but is then dropped to 16% thereafter.

Because the bill allows funds granted to states to be transferred to non-profit organizations that promote a better understanding and access to student loans and grants, the substitute requires that the non-profit recipient has been in existence before the bill is enacted and is operating offering information, assistance and other required activities.

August passage
Following the August recess, the Senate agreed to the conference report on the bill in a vote of 79 to 12. The House was Expected to agree as well on September 7th, which would clear the bill for the President's signature.

External resources

 * House Committee on Education and Labor
 * 110th Congress/Democratic Party agenda
 * 110th Congress