House Committee on Education and Labor
U.S. House of Representatives

Rep. Howard P. “Buck” McKeon
Ranking Member

Fiscally responsible reforms for students, workers and retirees.


Fact Sheet

July 11, 2007

The GOP Fiscally-Responsible Student Aid Alternative

The Republican-led student aid alternative nearly doubles the overall Pell Grant increase provided by the misdirected Democrat “student aid” bill (H.R. 2669, the College Cost Reduction Act), including a $350 increase in the maximum annual Pell Grant for 2008.

About one-third of the student loan subsidy savings in H.R. 2669 is directed to the most successful student aid program on the books today: the Pell Grant program.  Another third is directed toward temporary cuts to certain student loan rates for those who are, by definition, no longer even students.  And the remaining third of the bill triggers billions in new entitlement spending.  In fact, some of this new spending is not even directed toward students, but rather to institutions like colleges, universities, and philanthropic organizations.

The Republican fiscally-responsible student aid alternative will tip the balance back toward low-income students struggling to pay for their college education by increasing the maximum Pell Grant far more than the underlying bill.  The GOP proposal would provide more than $9 billion in new funding for Pell Grants over the next five years

Specifically, the GOP proposal adopts the same cut to lender insurance rates – from 97 percent to 95 percent – as the Democrat bill, while having the same goal of reducing administrative fees paid to guaranty agencies as well.  In addition, the measure would save the federal government $11 billion through lower special allowance payments.  With these savings – more than $15 billion in total – the Republican alternative:

  • Invests more than $9 billion in the Pell Grant program, increasing the maximum Pell Grant by $350 in 2008 (compared to a smaller increase under the Democrat bill) and by $100 for each year thereafter;
  • Pays down the federal deficit by more than $5 billion – more than THREE times the amount of deficit reduction contained in the Democrat bill;
  • Makes Pell Grants available to students year-round;
  • Eliminates a rule that needlessly punishes students attending low-cost schools by limiting the amount of Pell Grant funds they can receive each year;
  • Gives returning members of the military the ability to defer loans for up to 13 months;
  • Arms parents and students with more information about college costs than ever before, while insisting that colleges be held more accountable for their role in tuition hikes; and
  • Corrects a flaw in current law to equalize the Federal Family Education Loan (FFEL) program and Direct Loan rates for PLUS loans at 7.9 percent.
As opposed to the badly-misdirected Democrat “student aid” bill, the GOP alternative would accomplish all of this without creating a single, new entitlement program.  It would accomplish all of this without creating a maze of new rules and regulations for students, parents, and institutions to navigate.  And most importantly, it would accomplish all of this without short-changing the low-income students who need the most help.