Student loans may attain lower interest rates soon

Published: Monday, September 28, 1998

Monday, September 28, 1998

EDUCATION: Congress grapples with the details of Higher Education Act

By Edina Lekovic

Daily Bruin Senior Staff

Delayed 10 months by a snail-paced Department of Education and pushed aside by Congress in favor of sexy bills such as tobacco and transportation, you might say it's a miracle the Higher Education Act was addressed at all.

But largely due to intense lobbying by the United States Students Association (USSA) and the U.S. Public Interest Research Group (USPIRG), students may win advances in financial aid.

If the act is re-authorized by Congress and the president, students will experience a 0.8 percent decrease in student loan interest rates, which are currently 8.2 percent. The amendment could save student borrowers hundreds of dollars annually.

"Not only has USSA helped ensure expansion of educational access through grant aid, we are also at the forefront in designing new initiatives to tackle the opportunity gap and win concrete victories in the struggle for social justice," said Anthony Samu, USSA president.

Persistent lobbying efforts to keep the act from getting derailed from its original intentions appear to have paid off.

Enacted in 1965 under the Johnson administration, the Higher Education Act effectively created the federal financial aid system, which aimed to increase educational access to impoverished students.

If passed in its current form by Congress and signed by the president, the act will significantly lower interest rates on student loans, increase Pell Grant awards and expand educational outreach efforts.

After reviewing separate bills passed by the House and the Senate, congressional representatives are in the process of negotiating the final version of the bill. Officials are hoping this bill will reach the Oval Office by October.

Both bills would decrease interest rates on loans, increase the maximum amount of Pell grants and expand educational outreach programs.

Recommendations from 21 colleges and universities proposed few changes from existing law but urged Congress to let dependent students who work earn significantly more money without losing eligibility for Pell Grants.

The recommendation was included in both the House and Senate bills.

The law currently states that dependent students can earn $1,720 a year, without having the government consider those wages in calculating the family's eligibility for aid.

The House version of the bill would increase that amount to $3,000 - $5,500 for students who have declared themselves independent of any other financial support. The Senate version is less generous, and would only increase the cap to $2,200 ($4,250 for independent students).

Both bills would also create educational outreach programs. Amendments include grants to state- and-college school partnerships to improve the quality of teacher-education programs, and the expansion of early intervention programs to give children from low-income families the support needed to go on to college.

While the two bills differ in numerous minute ways, students and educators are preparing to make a final all-out effort to ensure that lawmakers understand student needs before the final bill is drafted.

Like her peers at USSA, Liz Geyer is pushing for the Wellstone Amendment, which would ease restrictions on the 1996 welfare-reform law imposed on recipients who wish to go to college.

"The Wellstone amendment was a big victory because we had a lot of opposition. There's a lot of glitches," said Geyer, who is external vice president of the Undergraduate Student Association Council (USAC).

"Single mothers who were going to college didn't get the opportunity to go to work and go to college, so this allows states at the very least to change the number of weeks that you go to school and at the most to count school as work," Geyer explained.

Sen. Paul Wellstone, D-Mich., spearheaded the amendment, which would make it easier for welfare recipients to go to college without also having to work. The House bill has no such amendment.

"We think it's essential for Congress to make a true commitment to families that are trying to break the cycle of poverty," Samu told the Chronicle of Higher Education.

Student lobbyists expect another battle over an amendment which would eliminate origination fees on student loans.

"USSA has long been active in the battle to eliminate origination fees, which unjustly require students to pay hundreds of dollars just for the ability to take out a loan, and which result in students paying interest on money that we never see," said Jamie Pueschal, legislative director of USSA.

"As students, we need every penny in order to meet rising expense costs," Pueschal said. "This will do much to alleviate some of the burden for the millions of needy students suffering under continually escalating loan debt."

Ten years ago, the ratio of loans to grants was two to one. Today, however, students receive nearly five loans for every one grant.

Analysts say this will mean a shift of responsibility from parents to students for financing higher education.

Due to this added responsibility, more and more college students are being forced to work longer hours in order to stay in school.

"College students are victims of the popularity of user fees," said Terry Hartle, vice president of the American Council on Education.

"'Let the beneficiaries pay' has become a popular refrain at all levels of government," he said.

Hartle foresees that students will be forced to borrow more and more as a result of this shift in financial responsibility, since many financially pressed state legislatures have forced public colleges to increase tuition sharply in recent years.

"The truth is that nobody really knows how the vast increase in borrowing will affect students' behavior," said Hartle, who was the director of the education staff of the Senate Labor and Human Resources committee during the 1992 reauthorization.

"But we are deluding ourselves if we think that it will not result in changes," he continued.

With students projected to borrow over $30 billion this year, Hartle may not be far off in his estimations.

However, at least one official believes that financial aid is being handed out far too generously. In fact, Boston University Associate Provost Peter Wood argues that "excessive federal assistance lures students who lack adequate preparation, academic ability or serious intellectual aspiration into academic programs that are inappropriate for them."

Wood's comments were published in The Chronicle of Higher Education.

He is among those who argue that the Higher Education Act has altered the character of American higher education for the worse, citing that the current loan system, while originally weighted toward grants, was simply a by-product of an act aimed at helping impoverished students.

While he concedes that access to higher education has expanded greatly, Wood argues the ultimate cost has been a fall in academic standards at the university level in order to make more money.

The final version of the Higher Education Act is now being hammered out by members of Congress from both chambers, and a final version of the bill, if approved, should reach the Oval Office by mid-October.

"USSA and our student organizations should be proud of the changes we have seen in higher education this year," the organization's fact sheet states.

"While we should applaud our successes, we also need to be prepared for the coming challenges of making access to education a top priority."

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