In an effort to take some pressure off students' wallets, the U.S. House of Representatives passed legislation Thursday that will help provide easier access to financial assistance for college
The Student Aid and Fiscal Responsibility Act, which passed by a vote of 253-171, is considered the largest federal investment in education in American history.
The act, which will be presented to the Senate by the end of the month, will pour roughly $40 billion into Pell Grant funding, raising the maximum annual awards to $5,550 in 2010 and eventually to $6,900 by 2019.
Other initiatives include providing roughly $2.5 billion to historically black colleges, bolstering programs that aim to help students finish school and simplifying the Free Application For Federal Student Aid process.
The bill also aims to save taxpayers about $87 billion over a 10-year span by switching the administration of loans from private banks to the Federal Direct Loan program and avoiding bank subsidies.
The legislation also aims to keep loan interest rates low, which are expected to increase to 6.8 percent by 2012.
"This is a very thrilling and very historic moment for our country," House Speaker Nancy Pelosi told reporters in a conference call. "It's fiscally responsible and the best investment we can make in our nation's future."
George Miller, a democrat from California who serves as the chairman of the Committee on Education and Labor, said the bill was a result of a strong bipartisan effort and support from banks - an unlikely suitor considering the revenue they anticipate losing when bank loans switch to Federal Direct Loans.
"At the end of the day, the banks just couldn't justify $8 to $10 billion of profit for a product [bank loans] that wasn't superior," said Miller, who believes the bill will have no trouble passing through the Senate. "They did what they thought would be best for students and their families."
Critics of the bill say it will stifle competition, place a burden on the middle-class taxpayer and cripple banks that rely on student loan interest payments.
The bill's supporters argue that the flow of finances into the American system will actually save taxpayers money by cutting out government subsidies toward the banks that make the loans.
Miller briefly addressed specific examples of states that are taking scalpels to educational programs in an effort to save money. In regard to Florida's situation, he said new programs made possible by the bill will help strengthen state institutions while alleviating tuition costs, which have increased in the past year. However, Miller was quick to point out that the programs will not be simply handouts.
"Governors are going to have to compete to make sure they get these funds," he said.
