Wednesday, July 11, 2007

Is Financial Aid For College An 'Entitlement' Program?

Following hot on the heels of the revelation that banking and finance firms have been offering kickbacks and other schemes to colleges if the schools make pacts with the firms offering such kickbacks, the Congress is voting today on a proposal to increase dollars for college education. Or, as the opponents from the GOP call it -- another dang Liberal new entitlement program.

Congressman George Miller outlines his proposals on his web page. Some details include:

The legislation pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry. It also includes $750 million in federal budget deficit reduction."


scholarship increases passed or proposed by Congress this year, the maximum "Under the legislation, the maximum value of the Pell Grant scholarship would increase by $500 over the next five years. When combined with other PellPell Grant would reach $5,200 by 2013, up from $4,050 in 2006, thus restoring the Pell’s purchasing power. Roughly 5.5 million low- and moderate-income students would benefit from this increase.

The legislation would also cut interest rates in half on need-based student loans, reducing the cost of those loans for millions of student borrowers. Like legislation passed by the House earlier this year, the College Cost Reduction Act would cut interest rates from 6.8 percent to 3.4 percent in equal steps over the next five years. Once fully phased-in, this would save the typical student borrower – with $13,800 in need-based student loan debt – $4,400 over the life of the loan. About 6.8 million students take out need-based loans each year."

The President vows to veto this bill, which would slash subsidies paid to Bank of America and Citigroup, SunTrust Inc. and many others. This bill was already passed in a slightly different form by the Senate.

I don't think I've ever heard programs which provide financial aid for college study referred to as 'entitlements', but that's a nifty buzzword of demonization. I thought money spent (even those dollars which arrive from the federal budget) or borrowed for college education were dollars of 'investment'?

Without financial aid and low-interest loans (an $85 billion dollar industry), I wonder how low college enrollments in the U.S. would become?

Tuition costs in Tennessee and nationwide have been steadily rising and rising and rising (much higher than the rate of inflation) over the last few decades.

NOTE: from a June article in the Tennessean newspaper:

It's 94 percent to 100 percent more expensive to attend a state university today than it was in 2000, but the cost of living has risen only about 22 percent."


"On the other hand, the National Association of Student Financial Aid Administrators reports that a majority of full-time undergraduate students — about 63 percent — don't shell out the full price for college expenses. They receive grants — money that does not have to be repaid — from federal and state governments.

For students who qualify for the state's lottery scholarship, the good news is that the state legislature's recent decision to bump annual awards from $3,800 to $4,000 will cushion most of the tuition increase's blow."

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