The economic downturn has made a growing college affordability crisis worse for America's students and families. Expanding access to an affordable college education is one of surest ways we can build our way out of this recession, and build a stronger, more competitive American economy for years to come. One of President Obama's most important strategies for helping regain our nation's lost economic ground is to ensure that America once again leads the world in college graduates by 2020. To get there, we'll need to dramatically re-work our nation's financial aid programs so that they deliver student aid more effectively to more students and families - and are more cost-effective for taxpayers.
On September 17th, the House passed the Student Aid and Fiscal Responsibility Act (HR 3221) -- the single largest investment in aid to help students and families pay for college in history--at no cost to taxpayers. The President signed the bill into law on March 30, 2010 as part of the Reconciliation Act. The legislation reforms the system of federal student loans to save taxpayers $87 billion - and then invests $77 billion of those savings back into education, particularly by making college more affordable, and directs $10 billion back to the Treasury to reduce entitlement spending. Among its many provisions, it increases the maximum Pell Grant from $5,350 in 2009 to $5,550 in 2010 and $6,900 in 2019 and keeps interest rates low on subsidized federal student loans.
Now more than ever, students and families need reliable, stable forms of federal student aid to pay for college. Our goal is to make our federal student loan program more cost-effective and efficient for those they were intended to serve: students and families working hard to pay for college, and our taxpayers. Reforming our student aid programs will not only made loans more dependable for students, but will generate significant savings that can be used to invest in making college more affordable and other education priorities.
The Student Aid and Fiscal Responsibility Act, which mirrors President Obama's student loan reform proposal, will make college more affordable and our nation more competitive by transforming the way our student loan programs operate:
It will help more students graduate with less debt. Too many students are graduating with record debt, partly because grant aid doesn't cover nearly as large a share of college costs as it used to. Our legislation will allow us to invest $40 billion in the Pell Grant scholarship, to keep interest rates affordable on need-based federal student loans, to simplify the federal student aid application process, and in other forms of aid that will help low-income, middle class and minority students pay for and complete college - at no additional cost to taxpayers.
It will stabilize and safeguard the federal student loan program that students and families depend on to pay for college. The intertwined economic and credit crises have exposed serious vulnerabilities in the structure of the federally-guaranteed student loan program - putting it on life support. Families shouldn't have to worry about whether the roller coaster fluctuations of the financial markets will hurt their access to low-cost student loans. By originating all new federal loans through the cheaper Direct Loan program, students and parents will be able to receive the exact same loans with the added assurance that these loans are entirely reliable, no matter what happens in the economy. This simple change will save taxpayers $87 billion over 10 years.
It builds on the best of what works in the private sector to provide borrowers with top-notch customer service. The legislation will allow state non-profit lenders and private industry to continue doing what they do best - servicing loans. It will allow private entities to compete for contracts to service these loans - ensuring that students get the best services available and maintaining jobs in communities across the country.
It will eliminate waste and create a streamlined, cost-effective program for families and taxpayers. Each year, billions of taxpayers dollars are being sent into a program that no longer works - and that the Department of Education can administer for a much lower cost. This is exactly the kind of waste we need to eliminate in tough fiscal times. By cutting out the middleman, this legislation will save taxpayers $87 billion over 10 years, according to the Congressional Budget Office. It's a smarter business decision for taxpayers and families.
In addition to investing to make college more affordable, H.R. 3221 will use the savings it generates to invest in President Obama's key education priorities.
It will make an unprecedented $10 billion investment to make community colleges part of our economy's recovery. For years, business leaders have told us there weren't enough workers with the knowledge and the expertise for their specific industries. H.R. 3221 will change that. It will help us build a 21st century workforce by strengthening partnerships among community colleges, businesses and job training programs that will align community college curricula with the needs of high-wage, high-demand industries. It will provide community colleges with the tools to replicate programs that are successfully educating and training students and workers for these fields.
Creating better educational opportunities demands that we invest in our students long before they reach college. To ensure that the next generation of students enters kindergarten with the skills they need to succeed in school, the legislation creates an Early Leaning Challenge Fund to increase high-quality early learning opportunities for low-income children. It also will help provide every child with access to a world-class learning environment by investing in school modernization, renovation, and repair projects that will create healthier, safer, and more energy-efficient environments -- a measure the House is already on record supporting.
Finally, this legislation will meet Pay-As-You-Go fiscally responsible principles and reduce entitlement spending by $10 billion.