The final language of the federal student loan bill will be significant for metro-area students and families, as well as lenders who will most likely face subsidy cuts.
Legislators will soon have to reconcile the versions of the College Cost Reduction Act of 2007 passed by the Senate and the House during the last two weeks.
Both bills increase money for Pell Grants to low-income students, among other provisions. But the House version halves the interest rates for federal student loans, while the Senate bill does not lower interest rates.
Under the House version, students in the District would see a $138 million increase in aid over the next five years through the interest rate cut and the boost in Pell Grants. The rate cut would affect about 16,437 students who take out need-based loans annually. Approximately 19,014 students who receive Pell grants each year could benefit from the bill, according to Congressional Research Service figures.
About $305 million would be funneled to Virginia under the House bill, benefiting about 73,700 students with loans and about 109,895 students with Pell Grants.
In order to pay for the program, both bills cut subsidies to lenders by just under $20 billion over the next five years. These costs will be passed along to students, said Jeff Andrade, executive vice president of the U.S. Education Finance Group, a medium-sized lender with offices in Alexandria. Lenders won’t be able to provide current discounts or offer smaller loans that are less profitable, Andrade said.
The threat of higher rates is real, said Rebecca Thompson, legislative director for the Washington-based United States Student Association.
Sarah Bauder, director of the student financial aid office at the University of Maryland, said she is “concerned about the ramification” of lender subsidy cuts, as lenders will have to minimize their seminars and other crucial educational tools they provide to students in order to cut costs.
In her state, students would see an increase of $204 million in aid over the next five years with the House version, affecting about 48,485 borrowers and about 77,280 Pell Grant recipients.
