As the upcoming Presidential election approaches, there is an increasing focus on educational programs. Often overlooked, higher education has become a platform both Democratic and Republican candidates are paying more attention. President George W. Bush and candidate Senator John Kerry have included unprecedented proposals regarding higher education in their campaigns.
President Bush suggests increasing Pell Grants by 47 percent, over those disbursed in 2001, in an effort to make post-secondary education more affordable to low-income students. The State Scholars program will award an additional $1,000 in Pell Grant funding, increasing the maximum to $5,050.
Moreover, increasing AmeriCorps Education awards will allow the President to expand access to higher education. Full-time members will receive an education award of $4,725 to pay for college or graduate school. The plan is to support 75,000 AmeriCorps members.
David Eisner, CEO of the Corporation for National and Community Service, states, "This budget request is a sign of how vital our programs are to President Bush's goal of creating a new culture of citizenship, service, and responsibility in our nation."
Student loan reformation has taken a front seat in political agendas for significant reasons. Each year, higher education institutions increase tuition rates by an average of 7 percent (even more in private institutions). Currently, first-year students are limited to $2,625 in federally backed student loans, an amount far below the average tuition rates nationwide. President Bush plans to increase this amount to $3,000 and allow more flexibility in loan disbursements for schools with low default rates.
Bush's plan will also encourage dual enrollment, allowing high school students to earn both high school and college credits simultaneously and graduate in less time. As an incentive to promote dual enrollment programs, President Bush will provide $125 million to community colleges who participate. Additional incentives will be provided to states that facilitate the transfer of credits earned at community colleges to four-year institutions.
With recognition of the imminent challenges faced by low-income families trying to afford higher education, Senator John Kerry has voiced his own agenda on the issue. According to Kerry, if elected he will offer a fully refundable College Opportunity Tax on up to $4,000 of tuition for every year of college. Additional aid will be provided to states that keep tuition down.
Senator Kerry's plan requires approximately $13 billion in new resources over 10 years. Kerry's plan will eliminate the subsidized and guaranteed profits currently received by private lenders of student loans (i.e., banks and credit unions) and redirect them to an aid program. If elected, Kerry will require banks to bid for student loan business in an open auction.
Kerry further promises to provide nonprofit organizations and campus service-learning initiatives with the means and the training necessary to entice student involvement in community service. Young people who sustain part-time effort in service will receive up to $2,000 annually to aid with their higher education expenses.
Kerry's Helping America's Children Learn initiative would educate today's youth by providing them with real life experiences. Kerry hopes to increase the number of current college students—approximately 60 percent—participating in community service.
Today, the federal student loan program guarantees billions in profits to banks and other private lending institutions. These private agencies receive student payments, government subsidies and a government guarantee protecting them from defaulted loan borrowers. These subsidies are determined by Congress and set at rates as high as 9.5 percent. According to Kerry's platform, studies show that these rates are substantially greater than private agencies need to earn a profit.
Kerry's campaign said in a statement, "The government guarantees lenders a certain interest rate on student loans, currently 3.4 percent. When student interest payments fall short of this rate, the government makes up the difference. Currently, however, when student payments exceed this rate, lenders get to pocket the extra money."
The Kerry plan would award private agencies student loan contracts by bidding at an auction, making all subsidies reasonable and competitive. Kerry expects this reformation to save taxpayers an estimated $12 billion.
Every year, the student loan industry funds billions of dollars in higher education. Reformation to the Higher Education Act is expected frequently, as the industry grows and requires new provisions. According to Rick Castricone, a representative for American Collegiate Financial Services (ACFS), "Typically, most people are quite naïve when it comes to student loans. This includes how they obtained them, who they owe, and how they are going to repay them." Reforming higher education initiatives is increasingly important to make education more accessible.
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