Extends Pell Grant authorization to 2017 and increases the maximum award to $5,400, an increase of $1,090, by 2012.
Cuts interest rates in half by 2012
Reauthorizes the Upward Bound programs.
Limits loan repayments to 15 percent of discretionary income
Allows borrowers to remain in income-based repayment for more than 10 years.
For borrowers in the income-based repayment program, federal student loan debt will be forgiven after 25 years of repayment. Borrowers employed in certain public service fields may have their loans forgiven after 10 years.
Establishes a new grant program called Teacher Education Assistance for College and Higher Education (TEACH) Grants. The grants provide $4,000 per year (with a maximum total of $16,000 for undergraduates and $8,000 for graduate students) to students who meet the following conditions:
Maintain a GPA of 3.25 or, for freshman, have a high school GPA of 3.25 or score in the 75th percentile on a college admissions test;
Complete, or work toward, a degree with the necessary coursework to become an elementary or secondary school teacher;
Teach for at least one year following college;
Meet Department of Education requirements to be considered a highly qualified teacher;
Eliminates a provision in the Higher Education Act that cut Pell Awards for students attending low-cost colleges.
Teach in high need fields including: math, science, foreign language, special education, reading, and bilingual education. Other fields may be considered high need if they are approved by the Department of Education;
Borrowers who do not complete the requirements will have their grants converted to loans.
Replaces the three-year limitation on loan deferment for certain members of the armed forces with a provision allowing borrowers to defer until 180 days after they are demobilized.
Creates a new grant program called College Access Challenge Grants that provides states with a 2 to 1 match on all dollars spent on increasing access for underserved groups. If states fail to raise spending over time, they will see their federal match reduced proportionally
Increases funding for historically black colleges and universities and minority serving institutions.
The increased aid programs are financed mostly through cuts to lender subsidies and payments to guarantee agencies. Specifically, the bill raises funds by:
Eliminating the “Exceptional Performer” program that allowed higher subsidies for lenders that meet certain requirements. The bar to be considered an “exceptional performer” had been set so low that virtually all lenders qualified.
Reducing the insurance paid by the federal government on defaulted loans from 98 percent to 97 percent through 2012 and to 95 percent thereafter.
Reducing the amount of funds guarantee agencies may keep from collection efforts by nearly a third.
Reducing Special Allowance Payments for both non-profit and for-profit lenders.
Increasing a fee paid by lenders to the Department of Education from 0.5 to 1 percent of the principle at a loan's origination. Lenders may not pass the fee increase to borrowers.
Decreasing payments from the Department of Education to guarantee agencies for account maintenance.
The bill also authorizes a pilot program in which the right to provide loans will be auctioned on the basis of competitive bidding by lenders. The proposed system is intended as a market-based substitute to the current practice of setting lender yield politically through legislation. While AACRAO supports a move to a market-based rate-setting mechanism, it has expressed strong misgivings about a rights-auction approach. Our objections are based on past experience with this particular approach, which was continually beset with problems and periodic losses of access to capital.
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Cuts interest rates in half by 2012
Reauthorizes the Upward Bound programs.
Limits loan repayments to 15 percent of discretionary income
Allows borrowers to remain in income-based repayment for more than 10 years.
For borrowers in the income-based repayment program, federal student loan debt will be forgiven after 25 years of repayment. Borrowers employed in certain public service fields may have their loans forgiven after 10 years.
Establishes a new grant program called Teacher Education Assistance for College and Higher Education (TEACH) Grants. The grants provide $4,000 per year (with a maximum total of $16,000 for undergraduates and $8,000 for graduate students) to students who meet the following conditions:
Maintain a GPA of 3.25 or, for freshman, have a high school GPA of 3.25 or score in the 75th percentile on a college admissions test;
Complete, or work toward, a degree with the necessary coursework to become an elementary or secondary school teacher;
Teach for at least one year following college;
Meet Department of Education requirements to be considered a highly qualified teacher;
Eliminates a provision in the Higher Education Act that cut Pell Awards for students attending low-cost colleges.
Teach in high need fields including: math, science, foreign language, special education, reading, and bilingual education. Other fields may be considered high need if they are approved by the Department of Education;
Borrowers who do not complete the requirements will have their grants converted to loans.
Replaces the three-year limitation on loan deferment for certain members of the armed forces with a provision allowing borrowers to defer until 180 days after they are demobilized.
Creates a new grant program called College Access Challenge Grants that provides states with a 2 to 1 match on all dollars spent on increasing access for underserved groups. If states fail to raise spending over time, they will see their federal match reduced proportionally
Increases funding for historically black colleges and universities and minority serving institutions.
The increased aid programs are financed mostly through cuts to lender subsidies and payments to guarantee agencies. Specifically, the bill raises funds by:
Eliminating the “Exceptional Performer” program that allowed higher subsidies for lenders that meet certain requirements. The bar to be considered an “exceptional performer” had been set so low that virtually all lenders qualified.
Reducing the insurance paid by the federal government on defaulted loans from 98 percent to 97 percent through 2012 and to 95 percent thereafter.
Reducing the amount of funds guarantee agencies may keep from collection efforts by nearly a third.
Reducing Special Allowance Payments for both non-profit and for-profit lenders.
Increasing a fee paid by lenders to the Department of Education from 0.5 to 1 percent of the principle at a loan's origination. Lenders may not pass the fee increase to borrowers.
Decreasing payments from the Department of Education to guarantee agencies for account maintenance.
The bill also authorizes a pilot program in which the right to provide loans will be auctioned on the basis of competitive bidding by lenders. The proposed system is intended as a market-based substitute to the current practice of setting lender yield politically through legislation. While AACRAO supports a move to a market-based rate-setting mechanism, it has expressed strong misgivings about a rights-auction approach. Our objections are based on past experience with this particular approach, which was continually beset with problems and periodic losses of access to capital.
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