A r c h i v e d  I n f o r m a t i o n

Significant progress has been made in the last seven years to expand federal financial aid for college. Average aid per full-time equivalent student rose from $3,614 in 1990 to $6,085 in 1999, a 68 percent increase. In 1998-99, the total amount of aid through federally funded sources topped $64 billion.

When President Clinton took office in 1993, for example, the Pell Grant maximum award was $2,300, the same as it was when President Bush took office in 1989. The maximum award has since increased by 36 percent to $3,125. In 1995, the maximum Pell Grant paid for 86 percent of tuition and fees at a 4-year public institution of higher learning; today, it pays for 92 percent.

In 1999, approximately 13 million Americans are eligible for the Hope and Lifetime Learning tax credits for postsecondary training and education, totaling $7 billion in aid. In addition, the restored tax deduction for student loan interest costs during the first five years of repayment will save borrowers $245 million.

Spending for Federal Work-Study increased by 41 percent from 1993 to 1999. The president has requested a $64 million increase in fiscal year 2000 to allow one million students to work their way through college. Since 1994, over 150,000 AmeriCorps volunteers can earn a total of $4,725 for college while serving local communities.

Under the new Direct Loan program, students receive loans directly from the Education Department rather than through government-guaranteed lenders. Because the Direct Loan program is substantially less expensive for taxpayers than the guaranteed loan program, taxpayers have saved over $4 billion during the past five years. The program has pioneered the use of new technology, streamlined loan processing and disbursement, and improved customer service in both programs through competition.

Student loans have also become more affordable. Since 1993, borrowers save $100 annually for each $10,000 in outstanding loans, and a total of $5 billion due to a lower interest rate formula. In addition, significant progress has been made since1993 in reducing loan origination fees: to date, these fees have been reduced from a maximum of 7 percent to 4 percent, saving students nearly $3.7 billion to date. In 1999, in recognition of widespread discounts available on guaranteed student loans, the administration reduced direct loan fees to 3 percent.

Repayment options have also become more flexible. Repayment flexibility allows graduates to pursue jobs that pay lower salaries even though they acquired a significant amount of student debt. The income-contingent repayment plan allows direct loan borrowers to repay their loans based upon their incomes; after 25 years, any remaining loan balance is forgiven.

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