Released: February 06, 2007

Bush Pell Grant plan would reduce lender subsidies

Source: Sandra Block, USA Today

The budget President Bush proposed Monday would increase federal grants to low-income college students by 33% over five years and pay for it by reducing subsidies to private lenders.

The Bush plan calls for raising the maximum Pell grant, which hasn’t been increased since 2003, to $5,400 from $4,050 over five years. To offset the cost, the administration proposes reducing interest-rate subsidies to private lenders by half a percentage point. The reduction would save the government an estimated $12.4 billion over five years, the Bush administration said.

Lenders that provide federally guaranteed student loans denounced the proposal. Sallie Mae, the largest lender, said in a statement that the cuts would cause fewer lenders to participate in the federal loan program.

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