College Opportunity and Affordability Act of 2008: Loans and Grants

H.R. 4137 was passed by the House of Representatives earlier this month, and is pending committee review and a potential vote in the Senate before possibly being sent to whoever is president at that time.

The bill has been moving slowly since its introduction in 2007, and it seems to have a particularly low priority because Washington is using its press time to cover security for Britney Spears and the medical habits of Roger Clemens. Obviously, Congress’ priorities aren’t in higher education right now, but this “College Opportunity and Affordability Act” could be a good way to fix problems left by last year’s major cut in federal student loan spending. Based on the press release that went forward a day before the Congressional vote, these are the suggested talking points:

• Students can pay off principle on college loans early without any early payment penalty
• Student borrowers can cancel a private loan with in three days of signing
• Student lenders must inform a student of eligibility in federal programs before signing a private loan agreement
• Student lenders must make all optional loan terms available for the student’s consideration and clearly define the technical terms of the loan such as interest rates, required monthly payments, fees, and charges.

The rest of the “official” talking points were previously addressed in the Student Loan Sunshine Act of 2007 but there is a lot in the current bill that isn’t covered by the press release.

Essentially, the bill would open up a huge line of credit to the student lenders participating in the program by raising the maximum loan amounts on all subsidized programs. This is mostly done by raising the amount of a federal loan that can be spent on each section of costs, like books, fees, tuition, etc… but it also increases direct aid to students in the form of larger Pell Grants.

Although the bill provides increased liquidity to banks in the form of higher loan limits, it also provides students a way to work off that debt through work repayment student loan forgiveness programs. These programs cover a wide range of majors and careers, and recent revisions of the bill have added even more careers eligible for debt repayment, including physical therapy.

There are several reasons why this bill is moving slowly through Congress, and one of them is probably the scope and ambition. Almost every section of the Higher Education Authorization Act is visited, and issues from across the board are addressed, like:

• military members receiving in-state tuition ;
• assisting students with disabilities ;
• financial incentives to colleges and universities that can maintain low tuition costs.

While the program will cover some gaps created by last year’s legislation that reduced funding, the bill would also create an extra burden on the government’s annual budget and projected deficits. This funding shortfall is another reason why Congress may be reluctant to push this bill forward quickly or publicize it heavily in the media.

If it does get signed into law in a timely manner, the College Opportunity and Affordability Act of 2008 could be affecting the financial aid and student loan process as soon as June 2008 for students applying for the 2008-2009 school year. Of course, even if Congress does act quickly and submit the proposal, president Bush would still have the opportunity for a partisan showdown or possible veto.