FACT SHEET | February 12, 2008

Democrats are Committed to Helping Middle-Class Families Squeezed by Rising College Costs

Higher education is becoming increasingly important to achieving the American dream, yet more and more Americans are being priced out of the promise and opportunity that higher education provides. Democrats recognize that students and their families are struggling to cover the rising cost of college and have made college affordability a top priority. That is why Congress, under Democratic leadership, overwhelmingly approved the College Cost Reduction and Access Act to increase access to higher education and direct federal dollars to students – where they are needed most.

College costs have risen by over 60 percent during the Bush Administration. Average tuition, fees, and room and board costs at four-year private universities have increased by $10,067, from $22,240 in the 2000-2001 academic year to $32,307 in the 2007-2008 academic year. Tuition, fees, and room and board charges at four-year public colleges jumped from $8,439 for the 2000-2001 academic year to $13,589 for the 2007-2008 academic year – an increase of $5,150, or 61 percent. (College Board, Trends in College Pricing, 2007).

Moreover, while the federal Pell Grant program has proven to be indispensable for millions of students who might not otherwise have had the financial resources to pursue a college degree, the maximum Pell Grant award has not kept pace with the rising cost of college. While twenty years ago, the maximum Pell Grant covered 51 percent of the cost of tuition, fees, and room and board at a public four-year college, it covered only about one-third of those costs in the 2005-2006 academic year. (HELP Committee Analysis of Department of Education data)


Students struggle with the burden of student loan debt. More than 60 percent of undergraduates at four-year colleges have to take out loans, and the average amount of federal student loan debt upon graduation has increased from $7,663 in 1992-1993 to $17,400 in 2003-2004. When private loans are factored in, the average student loan debt in 2003-2004 was more than $19,000. (National Postsecondary Student Aid Study 1993 and 2004, National Center for Education Statistics) These increased debt burdens are affecting graduates’ career and personal decisions.


Student loan debt can deter graduates from entering public service. Student loan debt can deter some graduates from pursuing public service careers such as teaching and social work. Pursuing these modestly-paid but critically important careers would leave some graduates with an unmanageable level of student debt. (State PIRGs’ Higher Education Project, April 2006)


Lenders have been exploiting the student loan system. While students struggle to pay off their loans, the lenders who offer loans to students have been making record profits. The federal government has paid large subsidies to lenders who participate in the federal student loan program -- a relic from the program’s inception more than forty years ago when it was believed that incentives were needed to encourage lenders to take part in the program. Moreover, recent investigations have shown that lenders have been exploiting the student loan system, to the detriment of the very students they are supposed to be helping.


Under Democratic leadership, Congress passed landmark legislation to make college more affordable. Last fall, the College Cost Reduction and Access Act became law. This landmark bipartisan legislation will:


· Increase student aid for low-and middle-income students. TheCollege Cost Reduction and Access Act will provide over $20 billion in new student aid and benefits – the largest increase in student aid since the G.I. bill. The legislation will make college more affordable by:


· Raising the maximum Pell Grant by $500 to $4,800, and to $5,400 by 2012, an increase of more than 25 percent over the next five years;


· Simplifying the financial aid process for low-income students by increasing the income level at which a student is automatically eligible for the maximum Pell Grant; and


· Increasing the amount of student income sheltered from the financial aid calculation process, thereby reducing the existing penalty on students who work.


· Ease the burden of student loan debt. The College Cost Reduction and Access Act will help make student loan debt more manageable by:


· Capping monthly federal student loan payments at 15 percent of a borrower’s discretionary income; and


· Reducing the interest rate on subsidized student loans from 6.8 to 3.4 percent over five years.

· Provide incentives for students who commit to teaching and other public service careers. The College Cost Reduction and Access Act will help graduates manage their debt and encourage public service by providing loan forgiveness for borrowers who work in public service careers such as nursing, teaching, law enforcement, or the military, for 10 years.

· Reform the student loan system so it works for students, not banks. The College Cost Reduction and Access Act will provide benefits to students at no new cost to taxpayers by reducing excessive lender subsidies and redirecting these funds to students who need it most. The legislation will also establish a pilot program to encourage market competition among lenders, so that they are not overcompensated for the services they provide to students.

· Increase access to higher education. The College Cost Reduction and Access Act will increase preparation for and access to college. Specifically, the legislation will create College Access Challenge Grants to increase college outreach activities in every state, and will restore funding for Upward Bound, a program that seeks to increase high school completion and college participation and graduation rates among low-income students and first-generation college students. The legislation will also strengthen minority serving institutions, which are responsible for serving many of our nation’s minority students who would not otherwise obtain a degree; the College Cost Reduction and Access Act will invest an additional $500 million in these institutions.




  • Elizabeth Engel (224-3232)


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