Bills Are Bad News for Lenders, Good News for Students

The House proposal calls for a smaller (but still significant) Pell Grant increase while also slashing the interest rates on student loans in half to 3.4% from 6.8%. That would cut the total amount of interest paid on a 10-year loan with a $20,000 balance to around $3,620 from $7,619.

Both the House and the Senate are also calling on colleges and lenders to clean up their acts by eliminating the financial incentives some financial aid officers have to steer students toward certain lenders. The Senate plan would ban "gifts" from lenders to college employees and require disclosure when a faculty member is paid to sit on a loan company's advisory board or participate in a professional development program.

The full House and Senate should vote on the plans by the end of July. After that, they will go to a conference committee, where significant last-minute changes could arise. However, FinAid.org's Kantrowitz says that given the mood in Washington, student lenders may choose to simply take their lumps and move on.

"You've had bad news coming out on a daily basis," he says. "What they would like to see is this entire situation resolved as quickly as possible."

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