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On Thursday, the U.S. House of Representatives passed the Student Aid and Fiscal Responsibility Act of 2009 (SAFRA), which does away with taxpayer subsides to private lenders in the student-loan business, saving taxpayers $87 billion, according to Congressional Budget Office calculations. By cutting out these middlemen, the government will increase the amount of money available to those who qualify for the Pell Grant and Perkins Loan programs, as well as subsidize other educational initiatives.
Inside Higher Ed offered a list of the bill's major initiatives:
Provide $40 billion over 10 years to increase the maximum Pell Grant to $5,550 and ensure that it would increase annually by the rise in the Consumer Price Index plus 1 percent. Greatly expand and alter the criteria for the Perkins Loan Program. Pour $10 billion into community colleges in support of President Obama's American Graduation Initiative, designed to produce 5 million more two-year college graduates by 2020. Spend $8 billion over 10 years to strengthen early childhood education. Create a College Access and Completion Fund that would give grants to states and institutions with innovative approaches to increasing college going and graduation. Provide $4.1 billion to modernize and repair school and college facilities, including those damaged by Hurricanes Katrina and Rita. Make the interest rates on federal student loans variable beginning in 2012, when they are set to rise back to 6.8 percent. Simplify the federal financial aid form.
The bill also has broad repercussions for students who are military veterans, according to the Marine Corps Times. Among other provisions that aid veterans,
Also included is a provision that would provide grants for institutions to hire veterans resource officers to work as advocates for student-veterans. Grants would be available for colleges and universities that have 100 or more full-time students who are veterans.
You can watch video commentary by key House Democrats on the bill at the blog of the Speaker of the House.
One big concern is how well the federal government will be able to service the loans under a direct lending paradigm, as it takes considerable infrastructure to do so. Part of this infrastructure is already in place through the Department of Education (through whose website I make my own monthly student loan payments), but there's a good deal of understandable concern that lending processes will get bogged down by unnecessary bureaucracy. I think simplifying the FAFSA, the Free Application for Federal Student Aid, will go a long way toward reducing the anxiety and frustration parents and/or students feel about the process of borrowing money to pay for college or graduate school.
Countless bloggers have weighed in on the bill's passage--voting on which was largely along party lines. Not surprisingly, so runs the commentary on the bill.
Deb Cupples of Buck Naked Politics explains the ways the bill will save taxpayer money, and expresses her disbelief that Republican representatives opposed the bill:
It's downright bizarre that so many Republican politicians claim to be business oriented while failing to grasp a simple, business principle: cutting out a middleman saves money. Put another way,
Every tax dollar spent subsidizing a private lender's overhead, employees' salaries, profits, and corporate jets is one less dollar to actually lend to college students.
And legitimate middleman-costs are only part of the equation. Waste, fraud, and abuse on the part of private lenders added even more to the taxpayers' tab.
Check out this page at Higher Education's "New America Foundation" for links to stories about apparent corruption, including kickbacks, conflicts of interest, and luxury trips -- all of which cost money and may have been directly or indirectly subsidized by us taxpayers.
Definitely click through to that New America Foundation link Cupples mentions. It contains a huge, and eye-opening, compendium of links detailing abuse and fraud by private lenders.
The University of Oklahoma student newspaper cited concerns by two Republican Congresspeople from that state:
“Abolishing the Federal Family Education Loan student loan program in order to institute a government-run lending program that pulls dollars from the already overdrawn U.S. Treasury is a mistake,” Rep. Cole, who represents Norman, stated in an e-mail. “This is just another fundamentally flawed government takeover.”
Cole stated the legislation that was passed is similar to the health care bill in that he stated the student loan industry would be destroyed from a “public option.”
“It will cost taxpayers billions, eliminate private jobs and make students and colleges more dependent on the federal government.”
Rep. Fallin stated in a press release that the bill creates more bureaucracy for citizens and turns the
