Legislation overhauls student aid

As part of healthcare reform, student loans will become direct.

As part of healthcare reform, student loans will become direct.

Included in the health care reform bill passed last week was the Student Aid and Fiscal Responsibility Act, which aims through direct lending to invest in the Pell Grant program and make federal student loans more affordable.

At Temple and across the country, College Democrats have been organizing to support the bill, signed into law March 31.

Both the Temple College Democrats and College Democrats of America have focused their efforts on educating students and young people about the bill.

“Temple College Democrats have held weekly myth-buster Monday events during most of this school year. As a part of most of our tabling events, we promoted [SAFRA]. During the formation of that bill, health care was a hot topic, and student aid was not making the headlines,” Temple College Democrats Communications Director Elliot Griffin said. “Luckily, Pennsylvania Senator Bob Casey played an integral part in making this bill a reality so we were very attentive to the steps it was taking through Congress, and we thought it was important to educate the student body about the issue that will directly affect all of us.”

“Now that President Obama has signed the Healthcare and Education Reconciliation Act [Healthcare Reform Bill], we are hosting a press conference as a part of the Pennsylvania College Democrats to promote this to the City of Philadelphia and the many college students across this state,” Griffin, a sophomore political science and journalism major, added.

Katie Naranjo, president of the College Democrats of America, said in a conference call that her organization has been organizing rallies for college affordability and expanding access to make sure students have information.

“College Democrats of America has hosted hundreds of education events, rallies, speaker panels,” she said. “And even more impressive, just in a two month period, we held over 200 healthcare events on campuses in the U.S.”

In a conference call, Democratic National Committee Chairman Tim Kaine explained the specific elements of SAFRA.

SAFRA will invest $36 billion in the next 10 years to increasing the Pell Grant scholarships. It will invest $750 million to increase funding for innovative programs at state institutions that focus on helping students graduate. The $750 million will also increase funding for the College Access Challenge Grant program, according to the Committee for Education and Labor’s Web site.

Additionally, SAFRA will make federal loans more affordable for borrowers to repay by lowering the monthly payment cap to 10 percent of the borrower’s monthly income. This provision, however, will apply only to new borrowers after 2014.

“The income-based repayment plan already exists, but with a 15 percent cap. Cutting the monthly payment by one-third to 10 percent of discretionary income will make the monthly loan payments more affordable. It provides a safety net for students whose income after graduation is insufficient to repay their debt. The cost of improvements is only about $300 million per year,” Mark Kantrowitz, a student-aid expert and founder of finaid.org, said.

“Let’s be clear that the payment cap is based on what your salary is at the time of repayment. It is not a cap on how much you pay back, so it is not a 90 percent discount on the loan,” Temple political science Professor Robin Kolodny explained. “While the lower cap may not apply to current students, it may have some effect on the availability of loan money in the short term. Lenders may not want to make student loans if they do not think they can recoup the investment.”

The bill will also invest $2 billion in improving educational and career training programs in community colleges.

SAFRA will convert all new Federal lending to a lending program directly from the Federal government to students beginning July 1.

Kantrowitz, who said he tries to remain neutral regarding lending programs, said direct lending as opposed to the federally guaranteed student loan program, is better, and that he believes SAFRA will likely save students some money.

“From a practical perspective, the switch to direct lending will save students some money since the PLUS loan has a lower interest rate, 7.9 percent versus 8.5 percent, and a higher approval rate in the direct loan program,” Kantrowitz said. “The increase in funding for the Pell Grant program largely prevents a decrease in the maximum Pell Grant by back-filling a funding shortfall. The actual increases in the maximum Pell Grant are rather anemic. I hope that this is not the last word on Pell Grant funding and that Congress will decide to increase the Pell Grant further in future legislation.”
Kaine said SAFRA will save the government money, and those savings will be used to expand the Pell Grant program.

He estimated the bill will help an additional 5 million Americans obtain their degrees or certifications.

Griffin said she believes the bill will be especially important to Temple students.

“Because I know many students in the area that do receive assistance through Pell Grants,” she said, “I believe it is important to add that this bill invests $40 billion in Pell Grants and this amount will be appropriately adjusted for inflation.”

Valerie Rubinsky can be reached at valerie.rubinsky@temple.edu.

1 Comment

  1. Although award amounts will not be increased as much as hoped, Pell grant qualifications will be expanded for the 2010-2011 school year. Students who would have missed qualifying before, will now get awards.

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