Federal funds may shift away from lenders and into the hands of student borrowers in coming years if a new piece of legislation passes.

Last week, Democrats in the House of Representatives presented the College Cost Reduction Act of 2007. The act would do a number of things over a course of five years, which include:

• Increasing the maximum Pell Grant ultimately to $5,200.

• Cutting interest rates in half for federally subsidized student loans.

• Raising the amount of money students with jobs can earn before their financial aid is decreased.

• Guaranteeing student borrowers will not have to pay more than 15 percent of their income to lenders

• Providing tuition assistance to qualified undergraduates who commit to teach in high-poverty public schools or high-need subject areas.

• Making loan payment easier for those in public service positions.

David Creamer, senior vice president for administration, said this is all “good news” and part of a “positive trend” in the past months’ legislature to support students in higher education. Since the mid-1970s, he said the price of higher education has been increasing, but recent legislation has been attempting to lessen the financial burden for students.

“As a general principle, college affordability is on legislators’ minds because there’s such a connection between the economy and an educated workforce,” said Connie Hawke, director of federal relations and associate university counsel.

The new bill, Creamer said, seeks to eliminate the barriers of tuition costs and loan debt that keep students from pursuing higher education. One way it will do this is by making the amount of money in Pell Grants more in sync with the price of tuition.

“In the last few decades, Pell Grants have gone up very little and tuition has increased a lot,” he said.

He said a positive point about this bill is that other areas of the country’s budget will not be affected – most of the money will come directly from lenders and go to borrowers.

Hawke, however, said this is a concern because bank lenders will be losing money and their burden will fall onto other areas.

“Lenders are in the business to make a profit, and if they can’t make a profit on student loans, they’ll go elsewhere,” she said.

An article on The Chronicle of Higher Education Web site called the bill “ambitious,” but Creamer said it is “probably very doable.”

“The larger issue,” he said, “is can we stay on this track when more and more students need higher education beyond high school?”

Hawke agreed the bill is feasible, but said it still had a “long way to go.”

If passed, Creamer said the bill will be implemented in stages, but some benefits could come as early as next year.

“Ultimately, we want more students to attend the institution of their choice, not the institution they can afford,” he said.

Contact principal reporter Christina Stavale at [email protected].