If there is anything certain in the Information Age economy, it is that a college degree often is the best ticket to a comfortable middle-class life. But the cost of a four-year undergraduate education continues to rise, and federal financial aid programs have not kept up.
The House has passed a measure that would address years of neglect in college grant and loan programs. Both grants and loans would be increased in recognition of the wild inflation in the cost of a college degree - which has increased 40 percent above the inflation rate in the last five years - and student loan lenders would no longer have hefty profits subsidized by law. This reform legislation is long overdue, and President Bush should stop threatening a veto.
Under the College Cost Reduction Act, the maximum Pell grant - federal money given to low- and moderate-income students - would be raised by $500 a year for the next five years to $5,200. In addition, the interest rates for federally guaranteed student loans would be cut by half, from 6.8 percent to 3.4 percent, making it a truly subsidized loan program. The measure also provides some relief to young people after they graduate and start repaying their loans. The bill limits what borrowers pay to no more than 15 percent of their annual discretionary income.
House Republicans denounced the measure as a series of "welfare programs," although in the end 47 Republicans joined the Democrats to pass it. One has to wonder how many of the opposing lawmakers had relatives who benefited from the original G.I. bill? After World War II millions of returning veterans were given an opportunity to attend college mostly on the federal government's tab. Not only did Uncle Sam help cover tuition, books and health insurance, but vets were granted a monthly stipend for living expenses.
In 1960, half of the members of Congress had gone to college on this "welfare program," as today's congressional Republicans would have called it.
The House bill would be paid for by slashing $19-billion in federal subsidies to student lenders. The student loan industry has feasted for too long on a no-risk loan program where the federal government ensures its profits. But the industry lost a lot of political friends after investigations by the New York attorney general and others uncovered a cozy system between lenders and colleges, with students as the losers.
Student loan companies drummed up business by paying colleges commissions and sending college financial aid officials on free trips. Students steered to certain lenders sometimes ended up paying more for their loans.
The student loan industry is desperately trying to kill this bill, which can only mean one thing: The House got it right.