The Student Aid and Fiscal Responsibility Act

A Landmark Investment in America’s Economic Future

House Education and Labor Committee · July 2009 · http://edlabor.house.gov/

Now more than ever, Americans need affordable, quality education opportunities to help make our economy strong and competitive again. President Obama has identified an opportunity to make historic investments in our economic future by improving early education opportunities and making college dramatically more affordable - and all at no cost to taxpayers.

The Student Aid and Fiscal Responsibility Act embraces the president’s challenge. It will help us reach President Obama’s goal of producing the most college graduates by 2020 by making college accessible and transforming the way our student loan programs operate. It will expand quality early education opportunities that will put more children on the path to success. It will strengthen community colleges and training programs to help build a highly-skilled, innovative, 21st century workforce ready for the rigors of a global economy. And it will boost the fiscal health of the country our children will inherit by paying down the deficit. Specifically, the

Legislation will:

Invest the bill’s savings in making college affordable and helping more Americans graduate

Invests $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2011, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent.

Invests $3 billion to bolster college access and completion support programs for students. It will increase funding for the College Access Challenge Grant program, and will also fund innovative programs at states and institutions that focus on increasing financial literacy and helping retain and graduate students.

Strengthens the Perkins Loan program, a campus-based program that provides low-cost federal loans to students, by providing the program with more reliable forms of credit from the federal government and expanding the program to include significantly more college campuses.

Keeps interest rates low on need-based - or subsidized - federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012.

Makes it easier for families to apply for financial aid by simplifying the FAFSA form. Building on proposals recently put forth by the Obama administration, the legislation will dramatically cut down the number of questions on the form by allowing students and families to apply for aid using the information on their tax returns.

Invests $1.2 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate.

Provide reliable, affordable, high-quality Federal student loans for all families

Converts all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.

Provides all federal student loan borrowers with upgraded, modern, state-of-the-art customer service. Rather than force private industry out of the system, the bill will forge a new public-private partnership that provides all borrowers with the highest-quality customer service when repaying their loans and maintains jobs. It will establish a competitive bidding process that allows the U.S. Department of Education to select lenders based on how well they serve borrowers, educate them financially, and prevent loan defaults. It will provide a role for non-profits to continue servicing student loans.

Prepare students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete

Build a 21st century workforce by encouraging historic partnerships between community colleges, states, businesses, job training and adult education programs.       The bill will create a new competitive grant program for community colleges to improve instruction, work with local employers, improve their student support services, and implement other innovative reforms that will lead to a college degree, certificate or industry recognized credential to help fulfill local workforce needs.

Expands access to education by supporting free, high-quality, online training, high school and college courses. The U.S. Department of Education would be authorized to make competitive grants available to eligible colleges, workforce programs or other entities to help support the development of these courses.

Ensures that community college students can learn in modern, updated, state-of-the-art facilities by renovating campuses in need of repair.

Ensures that the next generation of children enters kindergarten with the skills they need to succeed in school

Increases the number of low income children entering kindergarten prepared to succeed by reforming state standards for early education programs and boosting the quality of existing programs. The legislation would create an Early Learning Challenge Grant program, which would award competitive grants to states that implement a standards-based birth-to-five early learning system that will improve early education standards, classroom environments, and invest in the early childhood workforce.

Provides every child with access to a world-class learning environment by providing school districts with funds for school modernization, renovation, and repair projects that will create healthier, safer, and more energy-efficient teaching and learning climates.

Meet Pay-As-You-Go fiscally responsible principles and reduce the deficit

Saves taxpayers $87 billion over ten years by switching to the cheaper Direct Loan program, according to the Congressional Budget Office. In addition to investing in college aid, this legislation will also direct $10 billion in savings back to the U.S. Treasury to help pay down the deficit.