FAP577: Higher Education Legislation Passed, Cassandra Thiem from Fastweb, iscintilla

Student Financial Aid News
+ From the Chronicle: With a threat of a veto by President Bush looming, the U.S. House of Representatives approved sweeping legislation on Wednesday that would make some of the biggest changes in student-aid policy in a generation by slashing nearly $19-billion in government subsidies to lenders and using the savings to expand federal assistance to students, make college loans more affordable, and reduce the federal deficit.
+ The bill, HR 2669, passed by a vote of 273 to 149. A total of 226 Democrats and 47 Republicans supported the bill. All of the votes against it were cast by Republicans.
+ The legislation, a “budget reconciliation” measure, would cut government subsidies to lenders by a little over half a percentage point and raise the maximum Pell Grant award by $500 over four years. It would also halve the interest rate on federal student loans for undergraduates over five years and make several changes aimed at helping borrowers who have taken on large amounts of debt (The Chronicle, June 13).
+ The bill would direct $750-million to reducing the federal deficit. The measure would also reward colleges that hold down tuition increases, while punishing those that raise their rates faster than the rate of inflation.
+ But President Bush and some other Republicans sharply criticized the legislation, saying it would create too many new government programs that are poorly designed and fail to focus enough on helping low-income students. The 273 votes in favor of the bill are short of the 289 required to override a presidential veto.
+ Among other things, the bill would:
+ Make several changes intended to help borrowers who have taken on unmanageable levels of debt: It would extend income-contingent repayment to borrowers in the guaranteed-loan programs; cap the amount of money that borrowers in income-contingent repayment must pay on their loans at 15 percent of the amount by which their adjusted gross income exceeds 150 percent of the poverty line; and forgive the remaining debt of students who have been in income-contingent repayment for 20 years. Borrowers in the income-contingent repayment plan must now make payments for 25 years before they are eligible for loan forgiveness.
+ Provide upfront tuition assistance to undergraduate students who commit to teaching in public schools in high-poverty communities or in high-need subject areas, and loan forgiveness for students who enter various public-service careers, including working as law-enforcement officers, firefighters, nurses, public defenders, prosecutors, early-childhood educators, and librarians, among others.
+ Assign institutions a “college affordability index” based on a comparison of their rate of tuition growth to the Consumer Price Index, a measure of inflation that has averaged around 3 percent or 4 percent in recent years. Colleges that raised their tuition by more than twice the rate of inflation for three consecutive years would be required to provide the government with an explanation of the factors contributing to the jump. If such colleges failed to slow their tuition increases after two years, they would be put on “affordability alert status” by the Education Department. Colleges that kept tuition growth at or below the index’s percentage change would get money to provide each of their Pell-Grant-eligible students with a 25-percent increase in their awards. Colleges that kept tuition nearly flat for four years would get funds to increase awards by an additional 10 percent.
+ Similar legislation is still pending in the Senate (The Chronicle, June 20), although it contains enough critical differences that drafting an eventual compromise bill between the two chambers could be complicated. Those negotiations will probably take place this fall.
+ The House measure also cast new uncertainty over plans by Sallie Mae, the nation’s largest student loan provider, to complete its sale to a group of private investors.
+ Sallie Mae announced in April that it had reached an agreement to be bought by a group led by J.C. Flowers & Company. Other partners in the group include JPMorgan Chase & Company and Bank of America, both of which also have student-loan units (The Chronicle, April 27).
+ At the time of the agreement, the Bush administration had proposed a cut of 0.50 of a percentage point, or 50 basis points, in the federal subsidy for providers of college loans. The House plan would mean a cut of 55 basis points, while the Senate plan would impose a 50-point cut.
+ In a regulatory filing on Wednesday, Sallie Mae said Flowers has warned that it “believes that the current legislative proposals pending before the House and Senate could result in a failure of the conditions to the closing of the merger to be satisfied.”
+ “The company strongly disagrees with this assertion, intends to proceed toward the closing of the merger as rapidly as possible, and will take all steps to protect stockholders’ interests,” Sallie Mae said in the filing.
+ Analysts suggested various possible motives for the announcement by Flowers, including the possibility that Flowers might only be seeking to negotiate better terms. Flowers and its partners had agreed on April 16 to pay $60 a share for Sallie Mae, which was 28 percent more than the stock was trading for at the time.
+ The fate of loans issued by Sallie Mae still unclear, but you can always consolidate your student loans at StudentLoanConsolidator.com

Scholarship Update
+ Shout It Out
+ The Shout It Out Scholarship provides students with a fast and easy online application. We will be awarding five (5) students each with a $1000 scholarship to use toward their postsecondary education. The scholarship program is open to US students who are 13 years of age and older and who are currently enrolled (or enroll no later than fall of 2012) in an accredited postsecondary institution of higher education. Students must be US citizens or permanent residents, and reside in one of the 50 United States or the District of Columbia. A complete application must be submitted online, and must include name and contact information, demographic details, academic details, and a short essay response (max 250 words) to the scholarship topic: “If you could say one thing to the entire world at once, what would it be and why?” Applications must be completed and submitted online on or before 11:59 pm EST on October 15, 2007.
+ Details at our free college scholarship search site

Expert Interview
+ Cassandra Thiem, Fastweb

Podsafe Music
+ i:scintilla, Capsella Toxin Remix

Reminders
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+ Student loan consolidation at StudentLoanConsolidator.com
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+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
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