President Bush signed an education bill last month designed to make college more affordable for lower- and middle-class families while cutting government funding for private student loan companies.
The College Cost Reduction and Access Act maintained veto-proof backing from both chambers of Congress, prompting a reluctant president to issue his support.
No Democrats voted against the bill, which passed the House 292-97 and the Senate 79-12.
"The new Congress made a promise to make college more affordable for all Americans, and that's what this bill is getting at," Jessica Schafer, a spokesperson for Rep. Edward Markey (D-Mass.), told the Daily. Markey represents Medford and Arlington, among parts of the state.
The legislation has two major components. The first will inject $11.4 billion into the federal Pell Grant program, which provides funds to the nation's neediest college students.
The current maximum grant is $4,310 per year, but it will increase to $5,400 by 2012 as a result of the bill.
The second part of the bill will cut the amount of government subsidies given to private student loan companies, while slicing in half the interest rates on need-based student loans over the next four years.
By 2011, the annual rates on these Stafford loans will be 3.4 percent, down from the current 6.8 percent. But in 2012, they will once again come with 6.8 percent interest.
At Tufts, where around 2,500 students use Stafford loans and about 500 receive Pell Grants, the bill is certain to have an effect, although Director of Financial Aid Patricia Reilly said that it may be a mixed one.
"It's a good thing ... but I wouldn't say it's a huge move forward in federal financial aid," she said of the legislation.
Specifically, while she is pleased by the increases in the Pell Grant program, she said that the reduced subsidies to private lenders could mean that some students will get less-accommodating aid packages.
This could happen, she said, because private loan industries will not be as profitable as they were before the bill.
"The concern is that if they cut those profits by too much, then private industry will get out of the student loan business, and the government will be doing all the student loans," Reilly said.
Rep. John Tierney (D-Mass.), who sits on the Education and Labor Committee, dismissed the idea that the bill will force private industries out of the student loan business.
"We've not seen any evidence of that yet," Tierney told the Daily. "There will still be lenders in the business."
But the total cuts in subsidies for lenders will equal about $20 billion, which Kevin Bruns, the executive director of America's Student Loan Providers (ASLP), said amounts to an 80-percent reduction in federal support for private student loan programs.
"That's a huge cut," Bruns, whose company represents the country's leading providers of private student loans, told the Daily. "It makes the program uneconomical for most lenders. ... They'll lose money."
Rep. Michael Capuano (D-Mass.) painted the bill as a triumph of the liberal political ideology, which favors government action over dependence on private business.
"This country believed for a long time that anything done by government was evil and inefficient, and anything done by private enterprise was good," Capuano, who represents Boston, Cambridge and Somerville, told the Daily.
"This wasn't true. I would argue that when we have a societal desire to educate our youth, government should be doing it," he said.
Alex Carter, a research associate for Campaign for America's Future, agreed. "It's much cheaper and [more] efficient to run the student loan program through the federal government," he said.
Carter also mentioned the recent uproar after New York Attorney General Andrew Cuomo found that corrupt student loan providers were giving kickbacks to universities.
"When you have subsidies, the private loan industry becomes intertwined with the federal loan industry," he said.
Bruns called this rationale unfair. While he admitted that Cuomo's investigation paved the way for the bill, he said that less than one percent of U.S. lenders and schools were involved in the scandal.
"It has been an overreaction," he said. "It doesn't make sense to punish the students - the borrowers - for the sins of a few."
He added that the majority of the companies implicated during the investigation were not supported by federal grants; they were operating completely in the private sector.
"The truth is that much of what happened had nothing to do with federal student loans," he said.
While government-subsidized, need-based private loans - those the recently passed bill deals with - are very popular, it is also common for students to seek additional funds that are not subsidized by the government, Bruns said. These are the kinds of loans that he said were primarily involved in the Cuomo's investigation.
According to Tierney, the bill is part of a congressional effort to balance the national budget by 2012.
He said that each committee has been looking for ways to save money, and that the Education and Labor Committee turned to lender subsidies with that goal in mind.
While most of the money that the government will save will be allotted to student aid, $750 million will go toward a down payment on the national debt.
After Rep. George Miller (D-Calif.) drew up the bill and brought it through the Education and Labor Committee (which he chairs), it went to the House in its original form and passed 273-149 on July 11. A slightly tailored version then passed the Senate on July 20 by a vote of 78-18.
Members of the House and Senate then met and agreed on a common bill on Sept. 6. The following day, the final bill passed the House and Senate.
Bush, who had previously threatened a veto, signed it into law on Sept. 27 in the face of overwhelming Congressional support. It took effect on Oct. 1.
