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Originally published Sunday, September 27, 2009 at 4:00 PM

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Overhaul student loan system to help more students

Legislation in Congress to overhaul the federal college-loan program, eliminating middlemen and using the savings to help more students, ought to survive partisan attempts to weaken it.

CONGRESS' overhaul of the college student-loan system offers welcome relief to students at risk of drowning in debt.

A bill passed by the House boosts Pell Grants annually for the next decade with increases, for the first time ever, tied to inflation. This expansion makes smart financial sense. Every dollar obtained from grants is one less that students from poor and working-class families must borrow and repay with interest. Nearly 7 million students nationwide receive Pell Grants.

Lawmakers should end federal subsidies to privatelenders, a proposal in Congress meeting with some resistance. There is no need for middlemen private lenders when students can borrow directly from the government's Direct Loan Program. The Congressional Budget Office estimates this shift would save $87 billion over 10 years. The savings would be used to expand the Pell Grant Program, improve early-education programs and strengthen community colleges.

Another welcome step is the Income Based Repayment program passed two years ago by Congress but only recently taking effect. The law caps monthly student-loan repayments to a percentage of income, important recognition of the rise in student-loan debt and its crippling impact on college graduates.

Congress' efforts also include simplifying student-aid applications by removing some asset and income questions. The information would be obtained by the Internal Revenue Service, a useful change saving families from having to hunt for tax forms and colleges from having to verify income and asset information.

By 2020, President Obama said the United States should lead the world in the rate of college degrees earned. Throwing this effort off track are state budget cutbacks resulting in substantial tuition spikes — 15 percent in this state, higher around the nation. A better, cheaper lending system helps get the president's important goal back on track.

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