Student Aid Reward Act of 2005

The Student Aid Reward Act of 2005 (S. 754) was designed to lower the cost of federal student lending by incentivizing colleges and universities to choose the most taxpayer-efficient loan programs. Under this bill, the Department of Education would calculate the savings generated by an institution’s choice of loan program and return at least 50 percent of those savings directly to the school.

For students and families, the practical impact would be an increase in financial aid, as the bill required schools to use these "reward" payments to supplement Pell Grants for undergraduates or provide need-based grants for graduate students. By linking administrative cost-savings to student aid, the legislation aimed to increase the total amount of grant money available to lower- and middle-income students without increasing the federal deficit.