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House Passes Overhaul of College Aid Program

WASHINGTON – The House has voted in favor of the biggest overhaul of college aid programs since their creation in the 1960s – a bill to oust private lenders from the student loan business and put the government in charge.

Thursday’s vote was 253-171 in favor of a bill that fulfills an array of President Barack Obama’s campaign promises, ending subsidies for private lenders, boosting Pell Grants for needy students and paying for community college reforms, among other things.

The measure goes next to the Senate, where its fate is a little less certain.

Putting the government in charge of all federal loans would save taxpayers an estimated $87 billion, according to the Congressional Budget Office. The CBO says the figure could be much lower, $47 billion, when administrative costs and market conditions are considered.

The money would boost Pell Grants for needy students, increasing the maximum grant by $1,400 to $6,900 over the next decade. It also would pay for a new college completion fund, community college reforms and more college aid for veterans.

“No student in this great country of ours should have to mortgage their future to pursue their dreams,” said the bill’s sponsor, California Democratic Rep. George Miller, chairman of the House Education and Labor Committee.

Yet the money also would be spent on things that don’t help pay for college, such as construction at K-12 schools and new preschool programs.

As consumers, college students probably wouldn’t notice much difference in their loans, which they would get through their schools. Broadly speaking, the bill doesn’t do much to make loans cheaper or help pay them off.

It does keep interest rates for need-based federal loans from jumping from 3.4 percent currently to 6.8 percent as scheduled in 2012. Rates for most other loans would remain at 6.8 percent.

Still, the bill’s changes to federal college aid programs would be the most sweeping since their creation in the 1960s and would fulfill a campaign promise by President Barack Obama.

The measure would end the subsidized loan program under which private lenders made $56 billion in government-backed loans to more than 6 million students last year, compared with $14 billion in direct loans from the government.

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