On September 7th, Congress passed the College Cost Reduction and Access Act, hailed by some as the most significant expansion of federal student financial aid since passage of the G.I. Bill in 1944.

The Act received bipartisan support – it was passed 79-12 in the U.S. Senate and 292-72 in the House of Representatives. Wisconsin’s federal delegation, with the exception of Reps. James Sensenbrenner and Paul Ryan, voted to pass the Act. Although he previously threatened a veto, President Bush signed the bill into law on September 27th.

Hailed as a significant victory for students, the law will increase the maximum Pell Grant award to $4,800 in 2008, to $5,000 by 2010, and to $5,400 by 2012. The Act also raises the cutoff for automatic Pell Grant eligibility from $20,000 to $30,000. Importantly, the funding increase for Pell Grants is on the non-discretionary side of the budget, meaning the Pell Grant funding increase is guaranteed at a certain level each year, eliminating the possibility of a cut or elimination in funding.

The Act also gradually cuts interest rates on federally subsidized loans (e.g. Stafford Loan) for low-income students to 3.4 percent by 2013.

The Act establishes the Teacher Education Assistance for College and Higher Education (TEACH) Grant that provides $4,000/year for as many as four years to high-achieving students (for freshman undergraduates, this means 3.25 GPA on 4.0 scale or 75 th percentile on admissions test). TEACH Grant applicants must agree to serve as a full-time teacher in a high–need subject for at least four academic years at a high-need school within eight years after completing the course of study. High-need subjects include: math, science, foreign language, bilingual education, special education, and reading specialist.

The Act makes several changes aimed at helping borrowers repay student debt. It creates an income-based repayment plan for borrowers in guaranteed-loan programs that allows repayment based on a percentage of income. Annual payments for borrowers in the income-based repayment plan are limited to 15% of the portion of the borrower’s income that exceeds 150% of the federal poverty line.

Borrowers who work in public service jobs and make loan payments for 10 years will have remaining loan balances forgiven. Public service jobs eligible for loan forgiveness include public education, emergency management, government, military service, public safety, law enforcement, public health, social work, public interest law services, child care, and public library sciences.

Architects of the bill – Sen. Edward Kennedy (D-Mass.) and Rep. George Miller (D-Calif.) among them – sharply cut federal subsidies to private student loan companies, using the savings to fund the student aid increases.

Private lenders have come under significant federal and state scrutiny since investigations have revealed how lenders provided higher education officials with gifts and other benefits in an effort to steer students toward their student loan products.