Legislation was introduced last week to provide colleges and universities with financial aid incentives rewarding them for their participation in the William D. Ford Federal Direct Student Loan Program and encouraging them to switch from the Federal Family Education Loan (FFEL) program. The companion bipartisan bills in the House and Senate counted among their sponsors Representatives Thomas Petri (R-Wisc.), and George Miller (D-Cal.), and Senators Ted Kennedy (D-Mass.), and Gordon Smith (R-Ore.).
Schools participating in the Direct Loan program would be rewarded with
grant aid to increase federal Pell scholarships by as much as $1,000 each
and/or provide need-based awards to lower- and middle-income graduate
students.
H.R. 1425, the Student Aid Reward Act (or "STAR" Act), was unveiled March 15 at a press conference. (The companion Senate bill is S. 754.) According to Congressional Budget Office estimates, the measure could generate $17.2 billion over 10 years in additional funding for Pell grants and/or graduate need-based aid.
In introducing the bill, Kennedy said at the press conference, "Our plan, the Student Aid Reward Act of
2005, will provide colleges and universities with grant aid to increase
federal Pell scholarships by as much as $1,000 each -- completely paid for
by increasing efficiency in our system of delivering student loans. The
independent, non-partisan Congressional Budget Office reports that our plan
will generate more than $17 billion in additional college scholarship aid
at no additional cost to taxpayers. We waste billions of dollars in
corporate welfare every year on student loans, and we cannot afford it any
longer. We should use scarce tax dollars to help students, not banks."
"Oregon students deserve the benefit of the most effective student loan program possible," said Smith. "When universities choose direct loans they deliver far more of the taxpayers investment to students. This bill strongly encourages and
rewards that choice."
Petri, the chief House sponsor of H.R. 1425, noted that, "The Congressional Budget Office and the President in his budget this year estimated that the guaranteed student loan program costs the taxpayers $8 for every $100 of loans made whereas the direct student loan program actually makes $2. That $8 per $100 cost translates into billions of
dollars for the American taxpayer for no particular return. We have a tight
budget year here in Washington. People are going to be looking around for offsets - for ways of trying to reduce the deficit. This is one area where it's possible to make some real savings without hurting the students, and helping the taxpayers."
"In his State of the Union address,
President Bush said a tax dollar should be spent wisely or not at all," said Miller. "We encourage the President to back up
those words by urging Republican and Democratic members of Congress to
support our bill. Maximizing the amount of taxpayer dollars that flow
to students, rather than to corporate middlemen, will help middle-class
American families and our economy at the same time."
For additional information on STAR see the news release, description, and chart provided by the bill's sponsors. The first is in PDF, the others are in Word.
By Larry Zaglaniczny
NASFAA Director for Congressional Relations and
By Elizabeth B. Guerard
NASFAA Assistant Director for Communications
Posted March 22, 2005 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Copyright 2005. Redistribution to non-NASFAA institutions is prohibited
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