The U.S. House of Representatives addressed the issue of student loans last week in the College Student Relief Act of 2007.
But according to Tufts Director of Financial Aid Patricia Reilly, the bill may not have a large impact on students at Tufts.
The legislation, which passed on Jan. 17 by a margin of 356-71, received bipartisan support and, if passed by the Senate, will gradually cut the interest rate on some student loans.
The bill involves subsidized Stafford loans, a common source of college-loan funds, given primarily to students from low and middle income families. The legislation supports a five-year gradual reduction of interest rate percentage from 6.8 to 3.4 percent.
Only loans taken out during or after July of this year will be affected.
The initiative was introduced to help students with loan payments. Taking out loans has been a very popular option for many young adults trying to finance their education. According to the Web site of the U.S. Representative's Committee on Education and Labor, the average student graduates with a debt of $17,500 along with their degree.
According to Reilly, though, the bill will not have much of an immediate effect on students.
"This change won't give students any more help in paying their tuition right now, and it won't give the financial aid office any more money to help pay students' tuition," she said.
"The problem with the legislation is that it will benefit students after they leave college, and it doesn't benefit them at all while they are enrolled," Reilly said.
Reilly said that the default rate at Tufts, which calculates how many students are unable to begin paying back loans two years after graduation, is only .3 percent.
"For the student population at Tufts, repaying student loans doesn't seem to be the problem," Reilly said.
She said that the bill is limited in that it applies only to undergraduates and will not cut interest rates for students taking unsubsidized Stafford loans.
"The interest rate on subsidized and unsubsidized loans used to be the same," she said. "Now there [are] different interest rates and different ways of accumulating interest, so it's making it more complicated."
Still, approximately 5.5 million students each year will receive some type of benefit from the legislation. Those who are affected can hope to see approximately $4,000 in savings if they take out $20,000 in Stafford loans over four years, which is close to the highest amount allowed, according to the Web site of the Project on Student Debt.
Reilly said that she hopes further legislation would do more for students by raising the amount they can take out in Pell Grants, which target students from low and middle income families.
Pell grants are awarded to students with family incomes under $40,000 and currently give a maximum award of $4,050 per year, according to the Federal Student Aid Web site.
Massachusetts Senator Edward Kennedy is working on a bill, the Student Debt Relief Act of 2007, which will closely mirror the House bill, but also raise Pell Grants to a maximum of $5,100 for the 2007-2008 school year and gradually to $6,300 for the 2011-2012 school year, according to the Web site of the National Association of Student Financial Aid Administrators.
"An increase to the Pell Grants would benefit students in the way that they most need it and would also target the students most in need," Reilly said.
Tufts Associate Professor of Economics David Garman agreed. "To my mind, this [current House bill] is less valuable than an immediate increase in the size of Pell Grants," he said in an e-mail to the Daily.
"A $1,000 increase in the Pell Grant would be an extra $1,000 in hand today that a student could use to pay college tuition," he said. This is easier for students to calculate and understand than borrowing more money due to lower interest rates, he said.
President of the Tufts Democrats Kayt Norris said that the current House legislation is a good start, as long as the goal of making college more affordable for everybody is not lost in the shuffle. "We can't forget the bigger picture of what needs to happen in the future," she said.
