Students worrying about how to get money for college will be able to breathe a bit easier if Congress signs the College Cost Reduction and Access Act legislation into law.

If signed by President Bush, as is expected, the act will help students with their financial problems in a varying number of ways, including increasing the Federal Pell Grant amount, reducing subsidized federal loan interest rates and decreasing the amount of allowances private lenders can get from the government.

“This piece of legislation is supposed to result in a positive impact on students. It will give them more of an ability to borrow what they need,” said Warren Madden, vice president for business and finance.

Currently, students receiving the Pell Grant get $4,310 per year. In this act, the amount will be increased until it reaches $5,400 in 2012. Since it is a grant, students do not have to repay this money. There are approximately 5,000 to 6,000 students at Iowa State who receive this grant.

“I think the motive of that part of the act is to encourage students to seek federal financial options first,” said Roberta Johnson, director of financial aid. “It’s also important for students to seek federal aid because there have been a number of abuses of the system by private lenders over the years.”

One such abuse is the “lender list,” in which some schools have a list of private lenders they steer students toward, in return for benefits from the lender service. Also, lenders receive government special allowances for lending money to students, but these allowances aren’t as necessary anymore, Johnson said.

“In the ’60s, when student loans started, private lenders got these allowances to ensure they didn’t lose money on deals,” Johnson said. “But now, this is an established business, and the government can more easily fund education for students, but the lenders still get these allowances.”

Another aspect is the dropping of interest rates in government loans to a low of 3.4 percent in 2012. It should be noted, however, that this only applies to subsidized government loans, and after June 2012, the rates go right back to where they are at now, between 6 and 6.8 percent.

“They had to be budget neutral, and, with cuts in other places, this was the only way for them to accomplish that,” Johnson said.

The difference between subsidized and unsubsidized loans is that, while both loans accrue interest during a college education, the government covers subsidized loans’ interest during that time.

Government loan interest rates can often be safer than private lenders’ rates as well. The unsubsidized government loan’s interest rate is locked at 6.8 percent.

At the same time, rates from providers such as Sallie Mae and JP Morgan have been known to jump to 12 to 15 percent, depending on market circumstances.

A third major feature of the legislation is that students who go to work in a public service career, like teaching, law enforcement or social work, may have any remaining loan debt forgiven.

“If they stay in that career for a decade, and they make every payment on their loan debt for that same decade, this act would then forgive the outstanding balance.”

If signed into law by President Bush, the act would take effect Oct. 1.

“Some people think that this will reduce the number of financial institutions interested in lending to students, but this won’t change what ISU is doing to help students,” Madden said.

“On the institutional level, this isn’t a negative piece of legislation.”