STATEMENT OF SENATOR EDWARD M. KENNEDY ON THE HOUSE VOTE TO CUT STUDENT LOAN INTEREST RATES

WASHINGTON, D.C. — Today, Senator Edward M. Kennedy, Chairman of the Senate Health, Education, Labor and Pensions Committee, issued the following statement on the House’s passage of the interest rate reduction bill:

I applaud my colleagues in the House for passing this vitally important measure, and especially want to recognize Chairman George Miller’s leadership on behalf of our nation’s students. The crisis in college affordability affects every low and middle-income family in America, and is threatening our economic progress as a nation. It’s obvious we need to act immediately to make student debt more manageable, and that’s why I look forward to taking up this critical issue in the Senate very soon. Students should not have to mortgage their futures in order to attend college.”

Senator Kennedy will continue to lead efforts in Congress to reduce interest rates on student loans and help students and families pay for college. He is co-sponsoring the companion bill to the legislation passed by the House today, and will reintroduce his Student Debt Relief Act, which contains other critically important measures to help students and families deal with the burden of rising college costs. Senator Kennedy hopes to move a Senate student loan package in February.

The Student Debt Relief Act
Senator Edward M. Kennedy's Fact Sheet:

The cost of attendance at a public four-year college increased from $10,375 to $12,796 from 2001-02 to 2006-07. The total cost at a private, 4-year institution increased from $27,404 in 2001-02 to over $30,000 in 2006-07. [College Board, Trends in College Pricing, 2006].

Even after financial aid is taken into account, 31 percent of an average family’s income is needed to cover annual expenses at a public four-year college and 72 percent of an average family’s income is needed at a private four-year college. [The National Center for Public Policy and Higher Education]

The purchasing power of the Pell Grant is declining. Today, the maximum Pell Grant only covers 32% of the total cost of attendance at a public 4-year institution while it covered 55% of the those costs 20 years ago.[College Board, Trends in Student Aid, 2006]

Less than half of college students graduated with debt in 1993, but two-thirds of college students graduated with debt in 2004 [Project on Student Debt]. Between 1993 and 2004, the average amount of federal student loan debt upon graduation from a 4-year college more than doubled from $7,650 to $17,400 [NCES, NPSAS 1993 and 2004].

Unmanageable debt is affecting students’ decisions to enter public service careers. Twenty-three percent of public college graduates and 38 percent of private college graduates would have an unmanageable debt level if they were to live on a starting teacher’s salary. The outlook is even bleaker for social work: student debt would be unmanageable for 37% of public college graduates and 55% of private college graduates living on the starting salary of a social worker. [State PIRG’s Higher Education Project, 2006]



Senator Kennedy’s Student Debt Relief Act:



Cuts student loan interest rates in half – from 6.8% to 3.4%. This would save the current typical student borrower $2,280 over the lifetime of his or her loan and save the beginning college student $4,420 when fully phased in. [State PIRG’s Higher Education Project]

Immediately increases the Pell Grant from $4,050 to $5,100. With an increase in the Pell Grant, over 285,000 more college students would be eligible for the Pell Grant next school year. The estimated average grant for next year would increase by $647, from $2,442 to $3,089. [American Council on Education]

Caps federal student loan payments at 15% of a borrower’s discretionary income. Forgives student loans after 25 years, and provides an option for 10-year loan forgiveness for individuals in public service careers, like teaching, law enforcement, and social work.

Generates $13 billion in additional need-based aid – at no cost to taxpayers – by reforming the student loan programs to encourage the use of the government’s less expensive Direct Loan Program. [Congressional Budget Office] If all schools switched to the Direct Loan program, the government would save $4.5 million next year alone. [National Direct Student Loan Coalition]