House bill to aid hard-hit students
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If passed into law, new bill would give millions to grants
A bill passed by the House of Representatives may cripple the college lending industry but put more money in students’ pockets. The Student Aid and Fiscal Responsibility Act passed in a House vote Sept. 17 with 253 votes in favor and 171 opposed. It has not yet been approved by the Senate.
“As the first member of my family to attend college, I want to extend this same opportunity to students in Nevada and all across our nation by making it more affordable,” said Congresswoman Shelley Berkley in a statement.
It is estimated that the bill could save the federal government nearly $87 billion, of which $77 billion would be invested back into education, with some of it headed toward increased Pell Grant funding.
“The investments in this bill will help Nevada’s students and dislocated workers obtain the education and training they need to compete in the workforce,” said Nevada congresswoman and UNLV political science professor Dina Titus. “With college costs rising, this landmark legislation will increase funding for Pell Grants, keep interest rates low on student loans and build a world-class community college system that will provide Nevada’s young people with a better education and less debt.”
The maximum amount of Pell Grant funding, which is provided to low-income students based on financial need, would increase from the 2009-2010 limit of $5,350 a year to $5,550 for the 2010-2011 school year. Under the new legislation, $40 billion would be invested in Pell Grant scholarships.
According to director Norm Bedford of UNLV’s Financial Aid and Scholarships Office, between 4,000 and 4,500 students at UNLV will be eligible for Pell Grants this year.
“Maybe $200 is not a lot to somebody, but to me, it is,” Bedford said.
He added that it is good to see the value of Pell Grants increase and that the money would add up over time.
“That is $200 less that a student needs to borrow and pay back, assuming that the student qualifies for the higher amount,” said Stephen Miller, chair of the UNLV Department of Economics.
Miller questioned whether the government could be more efficient than banks to collect delinquent loans. He noted that banks earn a profit when they provide students with loans. The government would not seek to profit from the student loans, but if the government does not efficiently get repaid for the loans, the reserve for the aid would gradually be depleted, Miller said.
“The qualifier is that the government does not introduce inefficiencies that eat away all of the saved profit. In other words, if government costs rose by more than the profit saving, students would pay a higher amount,” he said.
The Federal Family Education Loan Program is currently used by colleges to connect students to lenders for loans backed by the federal government. The program, which was initiated in 1965, serves millions of American college students a year.
America’s Student Loan Providers, an organization representing lenders within the FFELP, released a statement following the House vote calling the bill “a contradiction in that it eliminates consumer choice and market competition.”
“We’ve long supported the President and Congress in their efforts to increase access to higher education through greater federal investment in the Pell Grant program and other priorities. The Student Aid and Fiscal Responsibility Act, however, will result in serious and long-term consequences including significant job loss, new costs and disruptions for schools, decline in services, increase in defaults, and loss of consumer choice and innovation for students and families,” the statement reads.
The Direct Loan Program will be used entirely starting July 1, 2010. This program will ensure that students have affordable federal college loans, regardless of the economy.
Previously the government used lender-based programs, which relied heavily on taxpayer money. The Direct Loan Program is guaranteed by the federal government to ensure that the loans are more protected from any fluctuations in the market.
“The way the bill is supported, all the subsidies-paid banks will be eliminated. That way, there is no new revenue streaming and the money can be used to beef up other existing programs,” Bedford said.
He explained how UNLV is already utilizing the Direct Loan Program and that, in this aspect, UNLV will not see much change. The big difference, he said, will be that starting July 2012, the income tax of this program will not exceed 6.8 percent. Bedford said that students would have to pay less income tax in the long run.
The Perkins Loan program will also receive funding to strengthen the low-cost federal loans and make them more available to students. The Perkins Loan program is expected to expand to even more colleges. This program gives loans to students based on their need but requires the government, not the student, to pay interest for the time the student is in school.
The bill also aims to reduce the number of questions in the FAFSA application.
“The Obama administration has done a lot of studies that show that the FAFSA is too long, cumbersome and not user-friendly,” Bedford said.
He added that the multi-layered questionnaire discourages people who are unwilling to apply. The bill, he said, would make provisions that could streamline the application process. The government would make it possible to import tax information directly from the IRS. This would minimize human error and require less effort from applicants.
Titus said that $1 million a year over the next five years would go to Nevada to benefit college access and completion programs. Bedford said he advises UNLV students to apply early for financial aid, no matter which aid bills pass through Congress or how much extra funding the system receives.
“The early bird gets the financial aid worm,” he said.
Titus said she believes the loan bill will have widespread effects on education as well as other federal programs.
“In order to get a quality education, too many students in Nevada and across the country are facing a mountain of debt when they finish school,” she said. “In order for our young people and our country to prosper, we need to make a college education affordable and accessible. Reforming student financial aid will not only ease the burden on students and their parents; it will save $87 billion that will go to increasing financial aid and reducing our [deficit.]”