Representative Phil Hare, D-Ill., of the seventeenth district and member of the congressional education committee paid a visit to Monmouth College on Monday, Oct. 8. He addressed a crowd of students, faculty and staff in the Morgan Room of Poling Hall. Hare was touring most of the colleges and universities in his district to celebrate the recent passage of The College Cost Reduction and Access Act, a financial aid bill that will go into effect on Jan. 1, 2008.  

 Hare began his remarks by noting that “education is not an expenditure; it is an investment.” Hare said the bill was by no means a panacea, but called it a positive “first step.” He claimed the bill that was drafted in the House was much more expansive than the current version, but was altered in order to receive presidential approval. He hopes the bill will be revisited and expanded in the future. 

The bill has two central components. The first commits more federal money to Pell Grants and broadens the eligibility criteria for the grants.  Pell Grants are federally-funded, need-based grants. 28-30 percent of Monmouth College students currently receive these grants. 

The second part of the bill entails an interest rate reduction on subsidized loans.  It will cut interest rates in half over a period of five years, from 6.8 percent to 3.4 percent. A subsidized loan is a loan that the government agrees to pay the interest on while the student is still in college. An unsubsidized loan is a loan that is allowed to gather interest while the student is in school. Monmouth students are almost divided evenly between the two, although slightly more receive subsidized loans. Who receives what is determined by the FAFSA forms that students submit each spring.  Only the students who receive subsidized loans will benefit from the lower interest rate.

This is also where the difference between direct and private lending becomes important; institutions generally do one or the other.  For instance, Knox College is a direct-lending institution, and Monmouth College is a private-lending institution. In a direct-lending scenario, students apply for federal loans through their school, and the school is the loan’s originator. Students make loan payments straight to the government. Private lending is done through an intermediary, such as a bank.

 Rep. Hare suggested that a future program could provide students with opportunities for loan forgiveness, which would be available to students who had borrowed through direct lending only. Students who had borrowed from private lenders could become eligible if they consolidated their loans with the government. The program would require students to earn their loan forgiveness through service in disadvantaged areas (whether rural or urban). Theoretically, the government would place students in public sector vacancies for a period between 5-10 years. If they choose to leave the job before the end of their obligation, the loan forgiveness is null, and the student would be forced to pay the additional interest incurred over that period.

Jayne Schreck, director of financial aid, admitted “mixed feelings” about the bill. She cautions that the celebration may be premature. Schreck explained, “increases in funding for Federal Pell Grants are being funded by decreases in subsidies paid by the government to lenders on behalf of students. In other words, money is being moved from one pocket to the other and in the process some students will benefit while others do not.” The financial aid office is currently “investigating the possibilities of running two parallel systems” so that students would have the choice between direct and private lending in the future.

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