GOP Votes Biggest Financial Aid Cuts in History

GOP votes for biggest cut in the history of federal student financial aid.

GOP voted against Democratic measures to make college more affordable at no new taxpayer expense.

Congressional Republicans on the House education committee voted today to approve the largest cut in federal student financial aid in the 40-year history of the aid programs and defeated an important Democratic proposal to increase college opportunities for low- and middle-income students.

The House Education and the Workforce Committee voted along party lines to approve changes to the federal Higher Education Act, the main law governing student financial assistance and other college programs. Before final passage, the Republican majority rejected Democratic amendments to the bill that would have increased the annual Pell grant by $500 and reduced borrowing costs for students by an average of $6,000 over the life of their loans, proposals that would have come at no new cost to taxpayers.

House Republicans missed a golden chance to expand college opportunities for students,” said Rep. George Miller (D-CA), the senior Democrat on the committee. “Instead, to make up for Republican mismanagement of the federal budget, the committee bill forces students to give up $11 billion worth of financial aid to help reduce the massive federal budget deficit. This bill treats students as if they are responsible for Republican fiscal mismanagement.

The Committee Republicans were blinded by their mandate to help the big lenders as much as possible,” Miller added. “In the end, students and America’s economic competitiveness will pay the price.”

On behalf of committee Democrats, Miller offered an amendment that would have raised the Pell grant by $500 over five years and made student loans more affordable by allowing students to choose between a fixed and a variable rate when consolidating their student loans and keeping the interest rate cap on student loans at 6.8 percent. Congress promised in 2002 to establish the 6.8 percent cap, but the Republican legislation raises the cap to 8.25 percent – meaning that students already facing huge loan debt will accumulate even more. Miller’s proposals on student loans would have saved average student borrowers $6,000 over the life of their loans.

See http://edworkforce.house.gov/democrats/hr609onepageb.html for more information on Miller’s amendment.

Committee Republicans also rejected a bipartisan amendment that would have rewarded schools and students for choosing the cheaper of the two federal student loan programs – the Family Federal Education Loan Program, in which the government makes loans to students through middlemen, or the Direct Loan Program, in which the government makes loans directly to students. It is well documented that the Direct Loan program is far less costly than FFEL.

That amendment, by Rep. Thomas Petri (R-WI) and Miller, would have created at least $17 billion in additional funding for Pell grants over the next 10 years, boosting the grants by as much as $1,000 for some students. The amendment is based on the Student Aid Reward Act, or STAR Act, which Petri and Miller introduced earlier this year.

See http://edworkforce.house.gov/democrats/hr609starpager.html for more information on the Miller-Petri amendment.

Neither the Miller nor the Miller-Petri amendments would have cost taxpayers a dime or added to the budget deficit. They would be financed entirely by cutting wasteful subsidies paid by the federal government to banks and lending companies in the student aid industry.

The Republican legislation does cut some subsidies to lenders, a move that came after intense pressure from Democrats, newspaper editorial writers and student groups. But rather than use those savings to boost college opportunities, the bill approved today diverts those savings toward reducing the massive budget deficit rather than reinvesting the money into more federal financial assistance. Removing these funds from the system represents the largest cut in the history of federal student financial aid.