Enacting the largest increase in federal student aid since the 1944 post-World War II G.I. Bill, President George W. Bush signed the College Cost Reduction and Access Act last Thursday, which will increase the Pell Grant program by more than $11 billion over a period of five years and cut interest rates on Stafford loans in half in the next four years. Changes provided by the act started to go into effect yesterday.
"We're excited that there is more funding for higher education," said Haley Chitty, assistant director for communications at the National Association of Financial Aid Administrators. "The Pell grant increase is long overdue."
The bill will also help more University students gain eligibility for financial aid because it changes the method of calculating financial need, according to Yvonne Hubbard, director of Student Financial Services.
"The government is looking at need analysis and bringing it into 21st century," Hubbard said.
Additionally, the bill cuts subsidies given to student-loan providers, which takes away from lenders' profits.
"They are tightening up on the lending community," Hubbard said. "You are going to see more and more where Congress and the president are looking to the banking community to be more responsible to students and the country and to make less of a profit."
Others point out that cutting the lenders' subsidies could significantly reduce the benefits offered to student.
"Ultimately it will affect the benefits that lenders will offer students," said Curtis Johnson, president and chief operating officer of the Student Funding Group, LLC. "My sense is that the benefits that students are accustomed to will not be available."
According to Chitty, a bill cutting government subsidies to lenders was also passed last year.
"It has been a pattern for several years to reduce the lender yield but not as dramatic as this change," Johnson said.
Though the bill will decrease Stafford loan interest rates, Chitty said she believed government money allocated to fund this decrease should be used for the Pell Grant program, which help the neediest students in the country.
"Some of the funding could have been better targeted to the most needy students," Chitty said.
While Hubbard said she is pleased with the increase in the Pell Grant program, she said financial aid still has a long way to go.
"We would like to see year-round Pell grants for students," Hubbard said.
Year-round Pell grants could be used by students for summer school or to study abroad, according to Hubbard.
"This bill is great, unlike the bill last year which directed money toward budget savings," Chitty said. "This pushes money to student grants"
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