Congress moves toward renewing Higher Ed Act

One renewal change could make borrowing money more costly for University students.

Cati Vanden Breul

Congress moved one step closer to renewing the Higher Education Act late last week.

Although the Senate has yet to take action on the higher-education law, a House committee passed a bill that would reauthorize it for the first time since 1998.

The law was scheduled for renewal in 2003, but Congress has not yet agreed on what to include in the sweeping piece of legislation that governs most federal financial aid programs.

Among other provisions, the bill passed by the Committee on Education and the Workforce would increase the student loan borrowing limits for first- and second-year students, allow students to choose between a fixed or variable rate when consolidating loans, make Pell Grants available to students year-round, and require colleges to publish building safety information.

The reauthorization would also generate approximately $11 billion in savings from changes in the student loan programs that would go toward reducing the federal budget deficit.

One of those changes could make borrowing more expensive for students at the University.

Colleges offer federal student loans, mostly through the Direct Loan Program or the Family Federal Education Loan Program.

Because the University is a Direct Loan school, it provides student loans through government funds instead of private lenders. Currently, students with Direct Loans must pay an upfront fee that equals 1.5 percent of the amount borrowed. If they don’t make 12 loan payments on time, they are charged an additional 1.5 percent. The new bill would charge an upfront fee of 3 percent to all students with Direct Loans and forbid the government from offering any discounts or incentives for repayment. Private lenders would still be able to offer discounts to students.

“One of the purposes for having the two loan programs is to allow competition to help allow improvements in both programs,” said Kris Wright, Office of Student Finance director.

Forbidding discounts on Direct Loans could make an uneven playing field for the programs in the future, Wright said.

Before the University would consider any decision to switch programs, it will wait and see what happens when the law is approved by Congress in full, she said.

But the Direct Loan Program has many benefits, Wright said, including the amount of time it takes to disperse money to students.

“We are able to offer money to students very quickly if they have room in their aid package,” she said.

When loans are made through a bank, approval can take much longer, Wright said.

But parts of the bill would help University students, too.

Students with federal Perkins Loans can breathe a sigh of relief because the bill would reverse a proposal by President George W. Bush to eliminate the program.

Perkins Loans are especially beneficial to second-year student Jamie Butterfass, she said, because she is going into the health field.

Perkins Loans allow students who go into certain health fields to waive or reduce repayment of their loans.

“No one would have gotten anywhere if it weren’t for loan programs,” Butterfass said.

And, Perkins Loans help low-income students because they don’t require a co-signer, she said.

Before any of the proposed changes can take effect, the bill must be approved by the full House and Senate, a vote that will likely take place in the fall.