ROCHESTER, N.Y. -

Every year, the United States’ Committee on Education and Labor reports that more than 200,000 students make the decision not to attend college simply because they can’t afford it.

 But the government has recently acted to try to reverse the trend by passing the College Cost Reduction and Access Act of 2007.

Since going into effect Oct. 1, President George W. Bush has said that the act will make higher education more affordable to low-income students by most notably increasing the funding for federal Pell Grants. But local college administrators are staying cautiously optimistic about what to expect.

With an increase in funding for Pell Grants, the government is planning to dole out an increased amount of just over $2 billion in 2008 to $4.9 billion in 2017.

Fast Facts: Here are some of the changes that will take place under the College Cost Reduction and Access Act of 2007: • The interest rate on subsidized Stafford loans would be reduced from the current 6.8 percent to 3.4 percent by 2011. The rate would go back to the current level in 2012 unless Congress decided otherwise. • Beginning July 1, 2009, students wouldn’t pay more than 15 percent of their discretionary income to repay Stafford loans. • The maximum Pell Grant would increase over the next five years, hitting $5,400 by 2012. • Students who are in line to teach subjects like math and science in low-income, public schools for at least four years can get $4,000 a year in tuition assistance. • Graduates who work in the public sector can have any amount of their student loans forgiven after 10 years of work and loan repayment. Areas of work include the military, police or fire department, nursing and librarians.

The disbursement of money to students is based on need, with more money going to families who pay less for a child’s education. Currently, the maximum amount is $4,050 a year, but that will be increased by $490 for the 2008-09 and 2009-10 school years, $690 for the 2010-11 and 2011-12 school years and $1,090 for the 2012-13 year.

The act is the largest increase in financial aid since the GI Bill of Rights of 1944.

“It’s wonderful of Congress to authorize and the president to sign the legislation that authorizes these increases,” said Verna Hazen, the assistant vice president of financial aid and scholarships for the Rochester Institute of Technology. “But, the other part of that is when it comes to budget time, the funds have to be appropriated for the Pell Grant to be funded for that level.”

Hazen added that there are obviously plenty of parents who are glad that there will be changes, but she’s not getting overly excited yet since there are always lots of demands on the federal government for how to spend money. In this case, people won’t know if the appropriated changes will come through to their full amount.

Cindy Kohlman, the associate director of financial aid at St. John Fisher College, said that on one hand the overall increase is a good thing because the Pell Grant hasn’t kept up with inflation in the past and this helps to balance out college tuition, which goes up every year. On the other hand, she said more students are receiving federal Stafford Loans, which the act directly affects.

To help pay for the increases in the Pell Grant, Congress plans to cut subsidies it pays to private lending companies by almost $21 billion over five years. Essentially, that takes away a portion of money that the federal government sets aside for lending companies should students default on loans or for any unpaid balances. Because of that, lenders have said that those cuts will cause them to make their own cuts in benefits they’ve offered in the past, such as waiving or discounting some fees and reducing interest rates for borrowers to make on-time payments. For smaller lenders, the changes may mean the end of business, said Bruce Wolley, director of financial aid at Nazareth College, adding that some lenders in New York have already stopped giving out student loans.

“It will be something that we’ll need to watch carefully to see if any significant number of lenders (go out of business),” he said. “So far, it’s been just banking institutions that aren’t very large and certainly wouldn’t have had a significant student loan program and portfolio. It certainly would be a very serious matter if any of the larger lenders decided that they could no longer afford (student loans).”

Wolley said that there could be a period of significant change over the next few years as lenders figure out how to deal with changes in the financial aid landscape and that a lot of answers are still up in the air.

 Kohlman also noted that as lenders figure out how they plan to deal with changes, it could mean staff cuts and less customer service for students.

“Students are really going to lose in the end,” she said, calling it a “double whammy.”
Still, Hazen said the changes of the program aren’t all bad, but high school students looking at college shouldn’t just assume everything is taken care of.

 In the past, she said, Congress has called for Pell Grant increases, only to renege when it came time to figure out the budget for the next year.

“Anytime you’re talking about cutting the interest rates on student loan programs and increasing the Pell Grant, you’re talking about increasing access and making it easier for students to repay loans,” she said. “But now that they’ve authorized this, let’s make sure they they follow through. Anywhere there’s a budget process, nothing is a guarantee.”

Bryan Roth can be reached at (585) 394-0770, Ext. 270, or at broth@mpnewspapers.com.