College Cost Reduction Act “Soft” on Low-Income Students

The College Cost Reduction Act of 2007 passed the House and Senate, but is likely to be hung up with negotiations before it hits President Bush’s desk. Bush has threatened to veto the new measure due to the flimsiness of the bill in regards to low-income students. Many politicians have talked up the bill’s success, but much of this is marketing rhetoric.

As it currently stands, the College Cost Reduction Act is more oriented to post-college individuals, less focused on current students and those most challenged to get a college degree.

The biggest winners are the Pell Grant recipients—they will likely receive a significant boost in funds, although still far short of the funds once available only a few decades ago.

The bill cuts major subsidies to student loan lenders that offer the FFEL program. This action seems almost a reprimand for the past months’ worth of controversy brought on by unscrupulous and greedy lenders.

Components of the CCR Act:

• Pell Grants will be increased from $4,050 to $4,900 and a maximum $5,200 by 2011.
• Students pursuing a teaching profession stand to earn full tuition compensation in exchange for service in underrepresented schools. This takes calculated aim at the problem of inadequate teachers in poor schools.
• Forgiveness of student loans owned by public service professionals, including law enforcement, firemen, nurses, and even librarians after 10 years.
• $500 million in new investments to minority and underrepresented institutions.
• Student loan interest cuts for need-based loans.
• Federal student loan maximum borrowing limits to be increased.

“Drug Provisions” Remain Uncertain

Part of the proposed amendment to the Higher Education Act still faces an uncertain future. Currently any student convicted of a drug offense is summarily denied government aid regardless of how trivial the offense. Some sources suggest that the number of students affected by this controversial contingency is well over 100,000.

The FAFSA form requires applicants to answer the “drug conviction” question.

This “drug offense” measure was zipped onto the Higher Education Act of 1965 as the Aid Elimination Provision of 1998, also called the Souder Amendment.

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With the unfolding of the current fiasco between student loan providers and college financial aid offices, one student loan company has seen the fallout as a marketing opportunity. MRU holdings is using aggressive marketing reminding students of the recent fraud. The WSJ reports:

One of the MRU ads called the relationships between schools and lenders a “racket.” Another said more pointedly, “Before you choose, ask your financial aid office about the lenders on their preferred lender list. Ask if any of these lenders offered kickbacks or incentives to get on the list.”

MyRichUncle is offering a discount on their federally backed Stafford loans and PLUS loans with the hopes of later upselling students on more expensive private student loans.