Effects of loan bill still uncertain

With college costs rising more than 30 percent since he took office, President Bush signed… With college costs rising more than 30 percent since he took office, President Bush signed into law the College Cost Reduction and Access Act of 2007 last week. The legislation passed with bipartisan support in Congress – the House of Representatives approving the law 292 to 97 and the Senate voting 79 to 12 in favor.

The bill will appropriate more than $20 billion for Pell Grants for five years and increase the maximum value of a Pell Grant scholarship from $4,310 to $5,400 per year by 2012. The bill will also cut the interest rates on need-based student loans from 6.8 to 3.4 percent by 2012.

The need for student loan legislation is evident. According to the College Board, the average price of tuition at a private, four-year university has increased 5.7 percent to $22,218 from last year’s average of $20,980, easily outpacing inflation. Over a five-year period, average tuition at such universities has risen 27.8 percent.

But given such a meteoric rise in tuition, skeptics have questioned the effectiveness of the legislation. After all, if tuition rates continue to rise at the current rate, the increase in Pell Grants may be nothing more than a temporary bandage that fails to staunch the bleeding in the long run.

Suzanne McColloch, Pitt’s senior associate director for financial aid, disagrees with this view.

“Not only are all increases in financial aid important and necessary, but also Pell Grants are not designed nor funded to provide all the resources a student needs to attend college,” she said. “This legislation will benefit students in concert with other state, federal, local and institutional programs.”

Approximately 22 percent of all undergraduate students at Pitt received a Pell Grant from 2006 to 2007, according to McColloch.

Additionally, some Congressional opponents of the legislation – all Republicans – charged that the bill would amount to a drastic deterrent to the private sector banks that buy federally subsidized student loans.

While the immediate effects for students will undoubtedly be positive, student lenders have offered decidedly mixed emotions on the effects of this legislation. In addition to increasing funding for Pell Grants, it will also cut a subsidy to for-profit student lenders by 0.55 percent.

PNC Bank spokesman Fred Solomon is an example of someone with these mixed emotions.

“PNC bank is Pitt’s largest student lender and expects to remain so,” Solomon said. However, Solomon declined to speculate on the effect that the legislation would have on PNC’s future policies.

Some lenders, however, are not taking any action for now.

“National City has worked with its partners to continue offering the same products and borrower benefits until the end of this academic year and in some cases, this calendar year,” Bill Eiler, media relations representative of National City Bank, said. “Our commitment is to our student and school customers, and it would not be appropriate to drastically change our products or services until we have received full guidance from the Department of Education.”