Congress passed a new financial-aid bill Friday that will overhaul federal student-aid programs, including increases in grants and the slashing of interest rates on some student loans.
The program, which was approved by both houses of Congress, constitutes a major increase in the Pell Grant Scholarships, raising them from a current maximum of $4,050 to $5,400 by 2012.
Meanwhile, the interest rate on need-based student loans will be cut from 6.8 percent to 3.4 percent over the next four years.
President George Bush has said he will sign off on the legislation.
Frank Claus, Penn's interim vice president for finance, said that he was pleased with the bill, and that it would help the University find better ways to improve financial-aid packages.
"It will probably allow us, over time, to be creative in how we offer more [aid] to our students," Claus said.
Penn's office in Washington worked closely with Pennsylvania's delegation in Congress to get the bill passed, said Bill Andresen, director of Penn's Office of Federal Affairs in Washington.
The legislation will serve to help make college more affordable, fulfilling one of the Democrats' six campaign promises they made during the 2006 midterm election.
But its passage may have ultimately been driven by New York Attorney General Andrew Cuomo's ongoing investigation into improprieties in the student-loan industry, in which lenders gave universities everything from kickbacks to free travel and gifts in exchange for recommending their company to students.
The bill will be paid for by cutting the subsidy rate given to student-loan providers by 0.55 percent for for-profit lenders, and 0.35 percent for non-profit lenders.
"I certainly think the New York Attorney General's investigation added impetus to the bill and added to the margin it passed by," Andresen said.
The bill passed with overwhelmingly bipartisan support, with votes of 79 to 12 and 292 to 97 in the Senate and House of Representatives, respectively.
Companies providing student loans lined up in opposition to the measure, claiming that cutting the current subsidies would lead to companies withdrawing from the field , giving students fewer options.
These arguments, however, clearly were unpersuasive to those representing University City in Congress, all three of whom voted for the measure.
"The gateway to higher education has just opened wider," Congressman Chaka Fattah (D-Pa.) said in a statement last Friday after the bill passed. "Increasing access to higher education is the best way to increase the life chances and opportunities for all young people."
In addition to changes in loans and grants, the bill sets up loan forgiveness after ten years for students who enter public service fields, tuition assistance of up to $4,000 a year for students who commit to teaching in high-need subjects in public schools, and programs to assist minority-serving colleges.
The new provisions and increases will total $20 billion over the next five years, but because of the subsidy cuts, will ultimately reduce the federal financial-aid budget by $750 million.
