• Kennedy Introduced an Amendment to Increase the Maximum Pell Grant Senator Kennedy sponsored a bipartisan amendment to increase the maximum Pell grant by $450 to keep pace with rising public college tuition. Senator Kennedy’s amendment would have provided critical help to 4.8 million Pell grant recipients whose median family income is only $15,000 per year. In addition, the amendment would have supported Pell grants for 200,000 new students.

• Kennedy Offered a Budget Amendment to Increase the Pell Grant and Other Education Programs During consideration of the FY 2006 Budget Resolution, Senator Kennedy offered an amendment that would have increased the maximum Pell grant to $4,500 this year, instead of five years down the road. By closing several tax loopholes, Kennedy’s amendment would have rewarded over 86,000 Massachusetts students with larger grants. In addition, the amendment would have restored Bush Administration cuts to TRIO, GEAR UP, LEAP, and the Perkins loan program. Finally, Senator Kennedy called for loan forgiveness for teachers who commit to high-need schools and communities. Despite bipartisan support in the Senate, the amendment was rejected by the White House and Republican leaders during conference negotiations, making the FY 2006 budget the first in a decade to cut funding for education.

• Kennedy Sponsored an Amendment to Increase Pell Grants During consideration of the Labor-HHS-Education Appropriations Act, Senator Kennedy introduced an amendment that would have increased the amount awarded to Pell Grant recipients from $4,050 a year to $4,250 a year. While the cost of a college education continues to increase at staggering rates, the purchasing power of the Pell grant has fallen dramatically, leaving many families without the resources to send their children to college. Kennedy’s amendment would have made thousands of additional students eligible for assistance, including 1,500 in Massachusetts. The amendment was defeated with a procedural maneuver.

Kennedy Called for Sallie Mae Investigation into Student Loan Errors In 2002, a billing error performed by Sallie Mae led to dramatic increases in monthly payments, and forced many students to default on their student loans. In response, Senator Kennedy, joined by a bipartisan group of senators and representatives, sent a letter to Education Secretary Rod Paige requesting an investigation into the billing practices of the multibillion dollar company. Senator Kennedy said that, depending on the outcome of the investigation, Sallie Mae should be responsible for compensating any student loan defaults that resulted from the error. [11/14/2003]

Kennedy Fought to Restore Administration Cuts in Student Financial Aid During consideration of the Labor-HHS-Education Appropriations Act, Senator Kennedy cosponsored an amendment to block Administration-proposed reductions in student financial aid. Eligibility for federal education grants is determined by the federal need-analysis formula, which calculates eligibility by establishing how much a family can contribute to their children’s education. In May of 2003, the Administration proposed changes in the financial aid eligibility formula that, by the Department of Education’s own estimate, would have affected 84,000 students in the United States. In response to the changes, Senator Kennedy and a bipartisan group of Senators introduced an amendment that blocked implementation of the formula changes, restoring devastating cuts in financial assistance.

• Kennedy Criticized Student Aid Formula Changes In 2003, a bipartisan coalition in Congress successfully blocked the Administration’s proposed changes to the financial aid eligibility formula. However, in 2004, several Republicans quietly dropped their support of the effort, and allowed the new rules to go into effect the following year. The changes required families to commit a greater share of their income and assets toward college expenses, making it more difficult to qualify for financial aid – despite the dramatic increase in the cost of college.

Kennedy Decried Outrageous Student Loan Subsidies Made to Banks For more than a decade, Senator Kennedy has fought to close a loophole in federal law that allows banks to amass millions of dollars in student loans carrying government-guaranteed 9.5 percent interest rates. This at a time when students are paying about a third of that on their loans. From 2001 to 2004, the amount paid by the government to banks more than tripled. In 2004, reacting to Senator Kennedy’s consistent criticism of the loophole, Congress passed legislation providing a one-year fix to the loan scandal. Although Kennedy supported the final compromise, he condemned it as only a temporary solution that failed to address all the loopholes exploited by lenders. In particular, the bill neglected a problem that allows banks to reinvest profits made on student loans, and then make new loans at a 9.5 percent rate. Validating Kennedy’s concerns, payments to lenders at the guaranteed 9.5 percent rate rose by $22 million in the first quarter of 2005, the first quarter since the loophole was supposedly closed. Senator Kennedy will continue to work to address this wasteful subsidy, and ensure all loopholes vulnerable to abuse are closed for good.

• Kennedy Called on the Education Department to Audit Lenders for Loan Subsidy Abuse A May 2005 report issued by the Education Department’s inspector general concluded that a student loan company in New Mexico improperly abused the 9.5 percent student loan loophole to over-bill the government by as much as $36 million. The inspector general’s audit recommended that the Department reclaim the money. The finding increases the likelihood that other lenders – multibillion dollar lenders – are illegally exploiting the loophole to augment their subsidies, and that these taxpayer-funded overpayments should be recovered. Senator Kennedy, in a letter to Education Secretary Margaret Spellings, requested the agency audit other lenders to determine if they have abused federal law. In July, Secretary Spellings announced support for ending the loophole that allows lenders to capture excessive government subsidies.

Kennedy Introduced Legislation to Boost Higher Education Aid In 2005, Senator Kennedy introduced legislation encouraging colleges to provide student loans through the Federal Direct Loan program, instead of through private lenders. Students seeking financial aid can turn to two primary resources for assistance. The Direct Loan program provides loans by deducting money from the U.S. Treasury. The Family Federal Education Loan Program – the alternative federal loan option allowed under current law – offers loans through private lenders subsidized by the government. Instead of subsidizing middle entities such as banks, Direct Loans go directly to the college or university offering the financial aid. Senator Kennedy’s bill, the Student Aid Reward Act, would encourage colleges to switch to the Direct Loan program, and would reward those colleges with additional funds. The $17.2 billion in savings that would be achieved through providing Direct Loans could be applied to other educational awards such as Pell grants. In addition to savings for students and the government, Direct Loans are less expensive for schools to administer, and are simpler to process for students.

Kennedy Sponsored Improved Higher Education Act In 2005, Senator Kennedy sponsored a bipartisan, compromise bill to reauthorize the Higher Education Act. Evidence clearly indicates the United States is lagging behind other countries of the world in math, science and engineering. At the same time, public tuition has increased 35 percent over the past four years, which is forcing students to discard a college education, or borrow heavily to attend, resulting in future debt and financial difficulties. Senator Kennedy’s legislation would address these concerns by increasing financial aid and targeting it to students who need it most. The bill would provide $5.5 billion over five years for additional grants, and would make college loan programs more competitive to ensure students receive the best possible deal. To help more students obtain financial aid, loan limits would be increased, and the bill would make it easier for low-income students to apply for and receive assistance. In addition to financial support, the bill would extend and improve several minority education programs, and would address the teacher shortage in math and science by offering strong incentives to educators who choose to teach in underserved schools. As the bill moves through the Senate, Senator Kennedy hopes to include provisions that will improve the fairness of the admissions process, and crack down on student loan subsidy abuse by banks and other lenders.