$87 billion bill for student aid

Supporters say switching from federal to student lending would make college more affordable.

$87 billion bill for student aid

Eric Nehring

An $87 billion bill is currently waiting in the U.S. Senate and could pave the way for the largest student aid reform in more than 40 years. The Student Aid and Fiscal Responsibility Act is part of President Barack ObamaâÄôs education agenda to make college more affordable by cutting out banks and private lenders that receive governmental subsidies from loaning to students going to college. The bill passed in the U.S. House of Representatives last Thursday with a vote of 253-171. Transition to direct lending Colleges still using the bank and lender system would transition to the Direct Loan program, where the federal government lends directly to students, starting July 1, 2010. About 1,700 colleges have already made the switch to the Direct Loan program, including the University of Minnesota. The SAFRA bill would generate savings by eliminating the current system, which is more expensive than the Direct Loan program, said Director of the Office of Student Finance Kris Wright About 55 percent of students at the University take out some kind of loan to pay for college, she said. Rep. Keith Ellison, D-Minn., voted in favor of the bill. He said the current system gives some lenders the opportunity to make money. âÄúWeâÄôve got to keep the doors to the University open, and this means we need to have affordability,âÄù he said. Financial assistance Wright, who also serves on the National Direct Loan Commission, said the bill would increase the maximum amount awarded for Pell Grants from $5,350 in 2009 to $6,900 by 2019 and would then gradually continue to expand. The amount available for low -interest loans like Perkins Loans for need-based students would also increase, she said. The University loans about $3 million in Perkins Loans each year, and an additional $6 billion would be available for those loans, Wright said. âÄúIf a student couldnâÄôt borrow enough in their own name, and their parents werenâÄôt credit worthy or didnâÄôt want to take out a PLUS Loan, the student could borrow additional funds from the revised Perkins Loan program,âÄù Wright said. Ellison represents MinnesotaâÄôs 5th Congressional District, where he said about 17,500 students will be eligible for the Pell Grant by 2010-11 because of the bill. Ellison said $50 million would go to Minnesota for community college facilities. At least $1.6 million per year for the next five years would go to Minnesota for college access and completion, he said. Students speak Paul Buchel, chairman of the Minnesota Student AssociationâÄôs Legislative Affairs Committee, said the bill would be good for low-income students and would simplify a confusing FAFSA financial aid form . Buchel is working with MSA to create a student forum to voice opinions about the bill. He plans to send the results to Minnesota Sens. Amy Klobuchar and Al Franken . He said that while the bill received support in the House, he didnâÄôt think studentsâÄô opinions were given enough weight. âÄúFrom a studentâÄôs standpoint, if weâÄôre going to spend money on anything, it should be on students and financial aid,âÄù he said. Buchel said the bill is politically charged because those who voted against it are worried about spending and governmental control. âÄúPhilosophically, IâÄôm sure everyone agrees with it,âÄù he said. âÄúThe bill will be overshadowed by the health care issue, even though this is pretty landmark. I think, unlike the health care issue, you will see a few people crossing the isle âĦ because the Republicans are wondering how it will get paid for.âÄù Minnesota Rep. John Kline, R-Minn., the senior Republican on the House Education and Labor Committee, voted against the bill. Kline said in an e-mail that he proposed an amendment to create a new student loan model that considers lenders in the equation and uses in-school subsidies or repayment options to guarantee that students can pay back their loans. He said he voted against the bill because it would eliminate options for students, impose a new burden on colleges and universities and put billions of dollars in entitlement spending âÄî meaning only for those eligible for certain programs âÄî on future generations. Ellison said money for the bill would come from taxpayers and that it wouldnâÄôt raise taxes but would redirect resources from existing sources. According to a House summary of the bill, the legislation would save more than $10 billion in entitlement spending over the next 10 years. âÄúItâÄôs time for the government, which is elected by the people of the United States, to play a role in helping improve AmericansâÄô lives,âÄù Ellison said.