As higher loan rates hit students this weekend, Democrats in the U.S. Senate are pitching a measure to cut interest rates and beef up financial aid to college students.

The timing and broad goals of the legislation, however, have some Utah education and political leaders worried it may just be partisan tricks rather than any true attempt to save students money.

“This is a blatantly political bill. There’s no possibility that both Houses of Congress and the president could act on this before tomorrow, and the sponsors know it,” Sen. Orrin Hatch, R-Utah, said Thursday.

Students nationwide are facing a nearly 2 percent interest hike on student loans Saturday, a deadline that likely prompted the bill, said David Feitz, executive director of the Utah Higher Education Assistance Authority.

“It’s interesting that right before that deadline . . . here comes this bill. It’s already sort of received with that political stain on it,” Feitz said.

The Student Debt Relief Act, introduced this week by Sen. Ted Kennedy, D-Mass., aims to cut student loan rates in half — reducing Stafford loan interest rates on new loans from the new 6.8 percent rate to 3.4 percent.

The bill would also increase the maximum amount of federal Pell Grants for each student from $4,050 to $5,100.

“Families across the country are pinching pennies so they can afford to send their children to college,” Kennedy said in a news release. “The federal government needs to do more to help families.”

In a 70-page report released by the Democratic sponsors of the bill, the savings to students are broken down by state. In Utah, the plan could bring savings for Utah students up to $2,200 on a 10-year loan, plus an average increase of about $600 per Pell Grant for Utah students, the report states.

Feitz and Hatch, however, aren’t so sure the legislation can make good on those promises. While state education leaders have advocated for more federal aid, they’re not certain where the money will come from to fund larger Pell Grants.

“Look, I wish we could offer students lower rates — or even interest-free loans — but our budget won’t allow it,” Hatch said. “And anytime Senators Kennedy, Schumer, and Clinton are on the same bill, Americans should grab their pocketbooks and hide.”

Although Kennedy’s plan includes a switch to a direct loan program to save money, Feitz said he disagrees that change from the current system will actually save money.
“They sound really good on the surface, but the question is how do you pay for those proposals when the country is at war and there’s a looming budget crisis?” he said. “Can you do this in a way that isn’t so political that it’s just dead on arrival?”

Feitz said he hopes Republicans and Democrats in Congress can come up with a plan that doesn’t include “phantom savings” and “partisan bickering.” If they can, he said students may have a shot at saving some money.

“What we’re trying to promote is a reasonable, rational approach to encourage higher education in an affordable way, but at the same time make it something the country an afford,” he said.

Feitz added, however, that the bill is on the right track, addressing the main issues that are crippling access to an affordable education. As tuition continues to rise, federal aid and family incomes have remained relatively stagnant, Feitz said. That trend may start pricing potential students out of college and affect career choices as students try to repay their debts.
One provision in Kennedy’s legislation specifically addresses the problem of students bypassing careers like teaching and social work because of their debt burden. The bill would put a cap on loan repayment at 15 percent of a student’s income.

The bill would also allow loan debt forgiveness after 10 years of repayment for students who work in the public sector.

“Student debt is like quicksand — it swallows you up before you have a chance to gain your footing. Graduating from college should kick start a young person’s professional life, but massive debt will just bog you down for decades,” bill co-sponsor Charles Schumer, D-NY, said in a statement.

This entry was posted on Friday, June 30th, 2006 at 10:17 pm and is filed under Education, Financial Aid, Student Loan. Tags: College, Education, Financial Aid, Grant, Loans, Student, Student Loan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.