Wednesday, April 30, 2008

My Take on the College Cost Reduction and Access Act of 2007

Back when I still believed the government was serious about addressing the rising cost of higher education and inequalities with regard to access, I received an email update regarding the College Cost Reduction and Access Act of 2007. "Finally," I thought, "a law that might help people attend college!"

I read through the law, I read the summaries, and I read updates from nonprofits whose very job is supposedly to protect and advocate student/debtor interests. About the law, I saw buzz phrases and soundbites like how the law was going to "strengthen the middle class by making college more affordable" and "encourage and reward public service."


The only question I have after all this is why is this law being so highly touted? It comes nowhere near to addressing the roots of our current "cost of higher education" crisis.

That's why I'm going to go beyond the catchy soundbites and examine the claims versus the reality of the House Committee on Education and Labor.

1. "Strengthen the Middle Class by Making College More Affordable"

One of the boldest and most appealing political claims about the College Cost Reduction Act is that it purports to make college more affordable.

How does the law "make college more affordable"? By cutting interest rates on loans that you have to take out to pay un-affordable college costs and tuition.

In other words, the cost of college will remain unaffordable, tuition will continue to rise, and 18-year-olds who don't have the luxury of thousands of dollars on hand to pay tuition will "get to" continue paying for college with student loans. It's just that now these students will pay less interest for doing so- that is, they will have to buy less money to borrow money for college from now on.

This lower interest rate applies only to federal loans.

In what universe does "not making college more affordable" suddenly mean "making college more affordable"?

2. "Increase the Purchasing Power of the Pell Grant Scholarship"

For those who aren't familiar, the Pell Grant is a small need-based grant that low-income college students can get. First off, the purchasing power of the Pell Grant is relatively small. In 2006, the maximum Pell Grant that the poorest of the poor students received to pay for one year of college was $4,050. The College Cost Reduction Act will increase this maximum amount to $5,400, over the course of the next five years.

Okay, let's be realistic here. The $4,000-5,000 is free money, and that's good. But at the same time, the average cost [PDF document] of attending a public university is $12,796 and at a private university is $30,367.

From my own experience, I received a Pell Grant all four years of college and, despite receiving a large academic scholarship, I still left undergraduate with a relatively hefty debt load. Of course, in my stubborn insistence for my low socioeconomic status growing up not to be a barrier to attending an "elite" university, I made what I now recognize to be a financially unwise decision to attend an overpriced private school. That experience of being a poor student surrounded by relatively wealthy elites who have the privilege of bragging about various European [insert foreign country] adventures and taking for granted that their parents can and will pay for their college is, I suppose, a whole other blog topic.

My point here is that Pell Grants don't really offer much incentive for poor kids to feel as though any university door is open to them, even if they are qualified to attend that college. In addition, as the Department of Education notes, only students with family incomes below $45,000 are eligible for a Pell Grant, with most grants going to those with family incomes below $20,000. And, students coming from families with a combined "lavish" income of $45,000/year would be eligible for the lowest Pell Grant amount of about $400/year.

In sum, the purchasing power of the Pell Grant is low and will continue to be pretty low even after this increase. Secondly, many students whose parents are far from wealthy are not eligible for Pell Grants and must finance their educations with some combination of scholarships, student loans, and credit cards. Rather than addressing the root causes of always-rising college costs and the higher education "business," a society of two unequal classes is maintained: a class whose parents can and do write tuition checks versus a large class who must finagle some other way to pay for college.

3. "Encourage and Reward Public Service"

This one, too, hits pretty close to home for me as I have been working in the public sector for many years. The College Cost Reduction Act allows for someone's remaining federal student loans to be forgiven after 10 years in qualifying public service work.

Exploring this benefit a little more deeply, we find that this provision has many limitations.

In order to qualify for debt forgiveness one has to have made 120 student loan payments on or after October 2007. Fair enough. But basically, you have to work in relatively low-paying public sector while paying down your loans for 10 years. Those who graduate with high debt burdens will clearly benefit over those who graduate with lower debt burdens- as those with lower debt can perhaps pay off their debt within 10 years. So, to be more accurate, this provision really only rewards and encourages those with high debt and low incomes to work in public service.

In addition, your loans must be what are called federal "Direct Loans" held by the Department of Education. Private loans, which have higher interest rates than federal loans, are not eligible for forgiveness. And, federal loans that you have consolidated or that you will consolidate with non-"Direct Loan" consolidation companies are not eligible for forgiveness. I, for instance, consolidated my loans after graduating from law school and so I am not eligible for public service loan forgiveness at all. And, annoyingly, under current regulations, I am not allowed to "unconsolidate" my loans into the Direct Loan program. I suspect that many are in the same boat. [Update: Supposedly, during a one year window starting in July 2008 those in my boat will be allowed to re-consolidate their loans into the Direct Loan system. Let's see if that happens and how many hoops one has to jump through to do so.]

In addition, this provision does nothing to reward those who have already been working in public service. For people who, for instance, have been working at a nonprofit while paying down their loans for say the past 8 years, their years of public service for purposes of this loan forgiveness provision will still begin in 2007, just as a new graduate's will. Then after 120 payments beginning in 2007, any student loan debt that is remaining will be forgiven.

Fun times.

On the plus side, the list of qualifying public service jobs appears pretty broad and perhaps covers anyone working at a nonprofit organization. But those details haven't been challenged or significantly addressed yet.

So, that's my summary of the College Cost Reduction and Access Act of 2007. There are additional provisions I would have liked to discuss, but in the interest of not boring you I limited myself to the above three. My goal here was to provide a different view on the bill as it has been, I believe, wrongly portrayed as a huge benefit to the lower and middle classes. As the Law Career Blog humorously notes:

"It has been hailed by the House of Representative's Education and Labor Committee as 'the single largest investment in higher education since the GI Bill.' Interestingly, a separate press release from that committee explains that this 'investment' actually comes 'at no new cost to taxpayers.' A cynical soul might point out that this is not so much an "investment" as is it a "cost reallocation'...."

Yes. Perhaps I'm a cynical soul but I think this bill is extremely overrated. It fails to address class inequalities with respect to higher education while simultaneously ignoring the powerful and unaccountable student loan industry. Ironically, that the law is greatly hailed by the media, colleges, and politicians appeases lower and middle-class families who cannot afford college even though the law really doesn't do much for these families.

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