Student Aid Bill Hits a Slump
Posted 23 Mar, 2010
Almost since President Obama took office we have been following the progression of his administration’s student aid bill, a piece of legislation intended to shift student loan funds from subsidies paid out to private lenders so more of that money could be focused on the students and schools themselves.
Dollars and Sense
The longer the student aid bill has waited in limbo, the more stripped down it has become. For one thing, the huge savings projected for the bill (drawn from changes it would make to the federal student loan system) have already dropped by $26 billion dollars–from $87 billion to only $61 billion. With nearly 30% less funding than they had anticipated, lawmakers are scrambling to come up with a new acceptable division of the money.
The savings numbers changed after the bill got stalled in the Senate back in November and still–months later–hasn’t beaten out healthcare reform for Congressional attention. On the contrary: the revised bill is actually slated to pay out a reported $19 billion of its remaining savings not for more education-related improvements, but for the healthcare reform that caused the delay in the first place. That leaves only $42 billion for students; less than half of the original budget.
Ch-ch-changes
According to Inside Higher Ed, Pell Grant increases (free grants for very low-income students) will get the bulk of the funding. However, even that funding is down 14% from the initial plans for boosting the Pell Grant.
It also looks as though the bill will offer little to no help to those families in the middle who need to borrow federal loans to help pay for college: The money planned to help extend the low federal student loan interest rate past 2012 has been budgeted elsewhere, which means that even in this difficult economy, students’ interest rates will shortly be going up again.
Looking Ahead
While many items in the bill have changed, the direct lending provisions have not. Students will soon only be able to borrow federal student loans directly from the government, and many schools have already made the switch.
Though this eliminates the friendly competition that often secured interest rate discounts for students who borrowed federal loans through private lenders, federal loans are still likely to remain a solid option for students who need to find funds to pay for college. They will continue to have significantly lower rates and better consumer-protection policies than private, non-federal student loans, so keep them on your list of possible solutions to the paying-for-college problem.
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
image: mpasquini
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Almost since President Obama took office we have been following the progression of his administration’s student aid bill, a piece of legislation intended to shift student loan funds from subsidies paid out to private lenders so more of that money could be focused on the students and schools themselves.
Dollars and Sense
The longer the student aid bill has waited in limbo, the more stripped down it has become. For one thing, the huge savings projected for the bill (drawn from changes it would make to the federal student loan system) have already dropped by $26 billion dollars–from $87 billion to only $61 billion. With nearly 30% less funding than they had anticipated, lawmakers are scrambling to come up with a new acceptable division of the money.
The savings numbers changed after the bill got stalled in the Senate back in November and still–months later–hasn’t beaten out healthcare reform for Congressional attention. On the contrary: the revised bill is actually slated to pay out a reported $19 billion of its remaining savings not for more education-related improvements, but for the healthcare reform that caused the delay in the first place. That leaves only $42 billion for students; less than half of the original budget.
Ch-ch-changes
According to Inside Higher Ed, Pell Grant increases (free grants for very low-income students) will get the bulk of the funding. However, even that funding is down 14% from the initial plans for boosting the Pell Grant.
It also looks as though the bill will offer little to no help to those families in the middle who need to borrow federal loans to help pay for college: The money planned to help extend the low federal student loan interest rate past 2012 has been budgeted elsewhere, which means that even in this difficult economy, students’ interest rates will shortly be going up again.
Looking Ahead
While many items in the bill have changed, the direct lending provisions have not. Students will soon only be able to borrow federal student loans directly from the government, and many schools have already made the switch.
Though this eliminates the friendly competition that often secured interest rate discounts for students who borrowed federal loans through private lenders, federal loans are still likely to remain a solid option for students who need to find funds to pay for college. They will continue to have significantly lower rates and better consumer-protection policies than private, non-federal student loans, so keep them on your list of possible solutions to the paying-for-college problem.
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
image: mpasquini
Subscribe in a reader
Subscribe by Email
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