Durbin Denounces Federal Cuts to Student Aid

DURBIN DENOUNCES FEDERAL CUTS TO STUDENT AID

Imminent cuts to federal student financial aid programs are wrongheaded and will deny more than 40,000 Illinois students access to $95 million in low-interest loans, U.S. Senator Dick Durbin said during visits to Southern Illinois University on Wednesday and Loyola University Chicago on Monday.

"To keep America's edge, we need to recognize the value of investing in higher education and providing the assistance needed for our students to compete in the global economy, said Durbin. "We need to get our priorities right. The best investment we can make in our nation is in our students and in access to education."

The President's 2007 budget froze the maximum Pell grant at $4,050 for the fourth year in a row. He also proposed elimination of Perkins Loans, which provide low-interest loans to low-income families. The deficit reduction bill approved earlier this year included $12 billion in cuts to student aid -- the single largest cut in the history of financial aid programs.

The final bill included many of the items the banks pushed for - increased loan limits, elimination of origination fees - but left students out in the cold. Students will no longer be able to take advantage of historically low interest rates which are currently around 5.3 percent for student borrowers and 6.1 percent for parent borrowers.

As of July 1st, regardless of whether market rates are lower, student loan interest rates will be fixed at 6.8 percent for student borrowers and 8.5 percent for parents who borrow for their child's education. According to The Project on Student Debt, these new interest rates will result in payments that are 20% higher compared with the 2004-2005 rates - doubling the total interest paid over the life of the loan. Students will no longer be allowed to consolidate their loans while in school in order to lock-in low interest rates.

Last week, a Democratic effort to make college education more affordable was rejected. The amendment to the Senate-passed budget would have increased the maximum Pell Grant to $4,500 and restored the Perkins Career and Technical Education Program. The amendment would have also increased funding for campus-based student aid programs such as Supplemental Educational Opportunity Grants (SEOG) and work-study. Had the amendment passed, Illinois college students would have received nearly $583 million in Pell Grants instead of $510 million. The average Pell grant would have increased by nearly $300 per student.

Another amendment, written by Sen. Arlen Specter (R-PN) and Sen. Tom Harkin (D-IA) and supported by Durbin, passed the Senate and made some progress toward reversing the President's budget decision and adding funding back into student aid programs.

The cost of a college education is far out of reach for many American students. Twenty years ago, the maximum Pell Grant for low-income and working class families covered about 24% of the average cost of attending a 4-year private college. Now it covers about 14%. According to the U.S. Department of Education, the average student debt has increased by more than 50 percent over the last decade. Some students who have taken out private loans, for instance Sallie Mae borrowers, and run into financial difficulty have seen their total debt nearly triple due to compounding interest and fees that can lead to as much as 28% in annual interest.

http://durbin.senate.gov/record.cfm?id=253103&&