President Barack Obama signed the Health Care and Education Reconciliation Act yesterday, which amended the health insurance reform bill and changed the student loan system. I’m not wild about the health reform, which made almost every concession major industries wanted, but the student loan reform is without question a step in the right direction. As Obama noted yesterday, the bill pitted “the interests of the banks and financial institutions against the interests of students.” For once Congress did the right thing by moving to a system of direct student lending. The money saved by not subsidizing private banks that make student loans will support Pell Grants and several other programs.

Today the White House released a summary of benefits that student loan reform will bring to Iowans. The Pell Grant increases will mean an extra $291 million for Iowa students by the 2020-2021 academic year. Increases for the College Access Challenge Grant Program will bring about $7.5 million to Iowa over the next four years, and during the same period our state will receive at least $10 million over four years from a program aimed at community colleges and career training institutions. I’ve posted more details about those and other benefits after the jump.

Who could be against student loan reform that increases grants for students while saving the government money? Leave it to Republican Senator Chuck Grassley to find some convoluted way to characterize this reform as a “tax” on college students. Click over to Radio Iowa to read more. The Iowa Democratic Party blasted Grassley’s distortion as well as his abysmal voting record on student loans and grants. An excerpt from that release is after the jump as well.

Excerpt from White House press release, March 31:

Increases Pell Grants: The Health Care and Education Reconciliation Act invests more than $40 billion in Pell Grants to ensure that all eligible students receive an award and that these awards will be increased in future years to help keep pace with the rising cost of college. These investments, coupled with the President’s previous investments, more than double the total amount of funding provided for Pell Grants since the President took office. The law increases the Federal Pell Grant maximum award by the Consumer Price Index from 2013 through 2017, which is estimated to raise the award from $5,550 to $5,975, according to the non-partisan Congressional Budget Office. By academic year 2020-2021, the Department of Education estimates Iowa’s students will receive an additional $291 million in Pell Grants due to the changes in the new law.

Expands Income Based Repayment: Because of the high cost of college, about two-thirds of students take out college loans with an average student debt of over $23,000. This debt is particularly burdensome for graduates who choose to enter lower-paying public service careers, suffer setbacks such as unemployment or serious illness, or fail to complete their degree. To ensure that Native Americans can afford their student loan payments, the Health Care and Education Reconciliation Act makes the existing income-based student loan repayment program more generous for new borrowers after July 1, 2014. They will be allowed to cap their student loan repayments at 10 percent of their discretionary income and, if they keep up with their payments over time, forgive their balance after 20 years. As under current law, public service workers-such as teachers, nurses, and those in military service-will see any remaining debt forgiven after only 10 years.  According to Department of Education estimates, 1.2 million borrowers are projected to qualify and take part in the expanded IBR program between 2014 and 2020.

Increases Support for Minority Serving Institutions (MSIs): While many of today’s colleges and universities are facing a host of challenges-shrinking endowments, decreasing state appropriations, deteriorating facilities and increasing costs-many of America’s Minority Serving Institutions are feeling the pain more acutely. They do more with less and enroll higher proportions of low- and middle-income students. That’s why the Health Care and Education Reconciliation Act provides $2.55 billion to Historically Black Colleges and Universities and Minority Serving Institutions over the next ten years.   These dollars can be used to renew, reform, and expand programming to ensure that students at these colleges and universities are given every chance to live up to their full potential.

Funding for College Access Grants: The Health Care and Education Reconciliation Act extends and increases mandatory funding for the existing College Access Challenge Grant Program to $150 million per year over the next four years.  This program provides grants to States to help organizations provide services that increase the number of low-income students who are prepared to enter college and manage their student loans, such as by developing financial literacy and debt management skills.  Iowa is expected to receive approximately $7.5 million in additional funding due to the changes in the new law.

Investments in Community Colleges & Career Training: As the largest part of the nation’s higher education system, community colleges enroll more than 6 million students and are growing rapidly. They feature affordable tuition, open admission policies, flexible course schedules, and convenient locations. Community colleges are particularly important for students who are older, working, or need remedial classes. Community colleges work with businesses, industry and government to tailor training programs to meet economic needs like nursing, health information technology, advanced manufacturing, and green jobs. The Health Care and Education Reconciliation Act includes $2 billion over four years for community colleges. These resources will help community colleges and other institutions develop, improve, and provide education and career training programs suitable for workers who are eligible for trade adjustment assistance. Each state will receive at least 0.5 of the total funds appropriated to this program each fiscal year.

Ultimately, the education related provisions of the Health Care and Education Reconciliation Act are fully paid for by ending the government subsidies currently given to financial institutions that make guaranteed federal student loans. Starting July 1, all new federal student loans will be direct loans delivered and collected by private companies under performance-based contracts with the Department of Education. According to the Congressional Budget Office, ending these wasteful subsidies frees up nearly $68 billion which this new law reinvests back into students and into reducing the deficit. As a result of the savings and investments in this new law, Iowa and its students are expected to receive more than $299 million by academic year 2020-2021 in additional benefits for higher education.

Excerpt from an Iowa Democratic Party press release on March 31, 2010:

Grassley says student loan change will “tax” college students. “President Obama is signing another piece of the health care reform bill today which includes legislation making the U.S. government the primary lender to college students and stripping banks of that ability. Iowa Senator Chuck Grassley opposes the idea, which he says essentially will “tax” college students while eliminating thousands of jobs.” [Radio Iowa, 3/30/10]

Grassley Opposed $2.2 Billion for Higher Education, Including $1.7 Billion for Pell Grants.  Grassley, on September 9, 2003, voted against the Kennedy amendment to H.R.2660, which was an amendment that would have provided an additional $2.2 billion for higher education, including $1.7 billion for Pell Grants, $157 million for federal work study programs, and $115 million for supplemental education opportunity grants. [Vote 331, 9/9/03]

Grassley Voted Against Increasing the Maximum Pell Grant Award to $4,500. In March 2005, Grassley voted against an amendment that increased the discretionary spending limit in the budget by $5.4 billion to $848.8 billion to restore education program cuts and increase the maximum Pell Grant award to $4,500. It would decrease the five-year tax cut reconciliation instruction figure by $5.4 billion. [Vote 68, 3/17/05]

Grassley Voted Against Extending Expiring Tuition Tax Credit. In November 2005, Grassley voted against a $58 billion tax cut package that would have extended expiring tax cuts, including the college tuition deduction. “For those who say they care about fiscal responsibility, for those who say they are concerned about the explosion of deficits and debt, here is a chance to prove it,” Senator Kent Conrad said of his tax plan. “Here is a chance to vote for this amendment that will extend the tax provisions that are expiring this year for next year’s taxes, and to pay for it by closing abusive tax shelters.” [Vote 330, 11/17/05; Conrad Press Release, 11/17/05]

Grassley Was The Critical Vote for Largest Student Loan Cuts in History. Grassley voted for the final version of the 2005 budget reconciliation bill, which cut $12.7 million from college loans, the largest cuts to the student loan program in its history.  The measure was approved 50-50 with the Vice President voting to break the tie.  [Vote 363, 12/21/05; AP, 12/19/05; Washington Post, 12/19/05]

Grassley Voted For Tax Bill That Benefited Wealthy While Raising Taxes for Students. In May 2006, Grassley voted for the final version of the $70 billion tax reconciliation bill that removed a provision that had allowed 3.6 million students and families to deduct $7.1 billion in college tuition costs in 2003. The tuition deduction was included in earlier versions of the bill but was stripped in the final version. Meanwhile, the tax bill Grassley supported would only save middle income Americans $20 each while the top tenth of 1 percent (whose average income is $5.3 million) would save $82,415. [Vote 118, 5/11/06; Senate Finance Committee, 11/7/05; Democratic Policy Committee, 9/26/06 New York Times, 5/5/06]