Loan repayment could be overhauled
Passed by the House and Senate just a few weeks ago, the College Cost Reduction Act now only awaits the signature of President George W. Bush before being finalized and put into effect.
According to Assistant to the director of financial aid at CU Jeff Gregory, there is no reason to believe this act won’t be signed.
“All indications are that he will sign it,” Gregory said. “I can’t think of any reason he wouldn’t given the secretary of education hasn’t said anything (to suggest he won’t).”
Gregory believes this act has many benefits, especially considering the positive affects going to college can have.
“It is the best money you’ll ever invest,” Gregory said. “Having a college degree will pay off a lot over the course of a lifetime.”
The College Cost Reduction Act, among many things, is an amendment of the Higher Education Act of 1965. With the passage of the act, many factors will be altered in the field of financial aid. Some of these changes will include: a decrease in interest rates tacked on to student loans, an increase in the available money and the amount of Pell Grants given out each year, grant programs designed to help those entering the teaching field and a change in the repayment plans for loans.
The Teacher Education Assistance for College and Higher Education Grant program attempts to help undergraduate and graduate students seeking a teaching career. The student commits to four years of teaching in specified subject areas. During this four-year period the student will receive grant money.
“It’s hard not to be in favor of people who want to be teachers,” Gregory said. “If the student decides teaching isn’t for them and fails to complete the program, however, the grant turns into a loan.”
The act will also revamp the Pell Grant. While increasing the available money to award students, it was also extend its eligibility to more students each year. A decreasing number in Pell Grants over the years is one problem Gregory hopes this act can fix
“With the cost of higher education increasing (the act) is a sort of Band-Aid for the loss of Pell Grants over the years,” Gregory said.
A change in the repayment plans for loans will also help college graduates.
“It ties the amount of student loan repayment with (the student’s) income,” Gregory said. “(The amount) can’t exceed 15 percent and allows for relief to those who go into low-paying position.”
In addition to the repayment side, the money being paid during the student’s attendance at college will also take into account some new factors.
“We’re going to look at people’s income, recent inflation increase, the increased cost of living, etc. and recognize that $20,000 isn’t what it was five years ago,” Gregory said. “A loaf of bread doesn’t cost the same as last year.”
One of the most important contributions of the act, according to Gregory, is the affect it will have on interest rates of loans. The act places a gradual decrease of the interest rates, which will eventually be cut in half by 2012.
A study conducted by Project on Student Debt found the average debt of a student who graduated in 2006 to be $19,646. Add interest rates to that and the number only increases. This provision will help decrease the total amount owed, as well as revise the loan forgiveness policies.
CU grad student Andrew Hill, 25, is majoring in biology and knows all too well what debt looks like.
“I was in debt about $60,000, maybe more, after I graduated,” Hill said.
Hill was an out-of-state undergrad student at CU and did receive some relief from financial aid.
“Because I was out-of-state though, it didn’t cover that much,” Hill said.
Joe Krsnak, an in-state fifth-year history major at CU student, hasn’t quite felt the punch of his debt yet, but knows it’s coming.
“Financial aid is pretty much how I’m paying for college all together,” Krsnak said. “I think I calculated (my debt) out to be close to $100,000.”
Krsnak is still skeptical of the affects this act will have, however.
“You have to wonder what the technicalities are. If (the act) will decrease the amount of loans they can give to each student,” Krsnak said.
As for CU, the act shouldn’t affect the amount of loans available to students since CU directly receives its loans from the federal government. But those institutions receiving aid from lenders may.
“Basically lenders will now bid and institutions will be looking for whoever can (provide loans) for the least amount of money,” Gregory said. “Will a lot of lenders drop out after this? It’s all part of a business.”
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