A piece of legislation that would decrease the cost of loan interest rates and increase grant eligibility among college students is expected to soon be signed into law by President Bush.
The College Cost Reduction Act, introduced by U.S. Rep. Steve Kagen, D-Wisconsin, was overwhelmingly approved in both the House and the Senate Friday and could become effective as soon as next month, said Curtis Ellis, a spokesperson for Kagen.
Kagen told The Badger Herald the bill "allows children to get a higher education."
"You have to get a higher education today to compete in the global world," Kagen said. "A higher education will benefit your family, community, state and country."
Ellis said that the bill would cut interest rates on student loans in half over four years while increasing Pell grants, a federal grant program — all without burdening taxpayers.
"It does this without raising taxes because it reduces subsidies to the private student lending industry," Ellis said.
Ellis said that 76,000 students in Wisconsin take out loans each year and 68,000 students receive Pell grants.
Under the College Cost Reduction Act, students would save about $4,000 in interest payments over the life of a loan by cutting interest rates from 6.8 percent to 3.4 percent, Ellis said.
In addition to the lower interest rates, Ellis said, Pell Grants will increase by $1,900 each year for the next five years, resulting in the Pell grant's value being $5,400 by 2012.
The legislation will also make repaying debts and loans affordable for new college graduates.
"It caps loan repayment at 15 percent of the borrowers' yearly discretionary income," Ellis said. "So that way, you don't have unmanageable levels of debt, and you're not getting hit with loan repayment that is your entire take home pay."
The legislation also allows for loan forgiveness after 10 years of public service in fields such as nursing, firefighting or policing, and for individuals still suffering from economic hardship after 25 years of graduation, Ellis said.
Ellis added this legislation is the first major step in allowing access to higher education since the GI bill was signed in 1944.
"That created a skilled work force that created a middle class, and this bill is in the same spirit as that," Ellis said.
Ellis said the GI bill enabled 8 million World War II veterans to get the highest education and job training, and could "have been rightfully credited with creating America's broad middle class."
"(By) investing in education and allowing access to education … people are able to better themselves and we all benefit when that happens," Ellis said.
Michelle Curtis, associate director for the UW Office of Financial Aid, said UW has supported the College Cost Reduction Act, but wonders what would happen in 2012, when Pell grants would stop increasing.
"The hope will be if it's a good thing for students over the next five years, there's no reason to think it wouldn't be beyond five years," Curtis said.
