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The “Other” Bill

Combined with the historic health care reform bill which passed in the House yesterday, was another bill which promises to help college students who receive financial aid.  The Student Aid and Fiscal Responsibility Act (H.R. 3221) also known as the Student Aid Bill, eliminates subsidies which were given to private lenders who gave federally guaranteed student loans to college students.  The measure represents the single largest investment in federal student aid in history, and includes many of President Obama’s key education initiatives.

The student aid bill that passed in Congress in the final reconciliation package will revitalize the federal financial aid system. The federal financial aid system was created to make sure that, regardless of financial background, every student would be able to access a college education. But in the last decade, almost 4.5 million qualified high school seniors chose not to apply to college because the level of debt they would incur was too great. Today, two-thirds of college graduates are in debt with an average debt level of $23,200.

As a result of the bill, private lenders would no longer make federally subsidized student loans.  Instead the government would make all such loans itself.  Eliminating the middleman would save the government an estimated $61 billion over the next decade.   The Bill is fully paid for and reduces the deficit by at least $10 billion over 10 years.

The legislation is expected to:

  • Make college more affordable for millions of students by investing a total of $36 billion into the Pell Grant program over 10 years.  The bill increases the maximum award from $5,500 next year to nearly $6,000 over the years ahead.  If the bill had failed, the maximum Pell grant would have dropped to about $2,150, less than half the $5,500 maximum projected for next year.
  • Protect students’ Pell Grant scholarships from the upcoming budget shortfall. The provisions will direct $13.5 billion of the $36 billion Pell Grant investment to address most of the gap needed to ensure there is not a dramatic cut in Pell grant funding in 2011.  It was predicted that if this gap was not addressed, students would see a decrease in aid of almost 60 percent and nearly 600,000 students would lose the benefit entirely.
  • Keeps jobs in America. Rather than force private industry out of the system, lenders will compete for contracts to service all federal student loans, which will guarantee borrowers high-quality customer service and preserve jobs.  Unlike loans made by private banks, direct government loans must be serviced by U.S. workers.  Last year Sallie Mae was forced to bring 2,000 jobs back to U.S. soil to win a direct loan servicing contract.
  • Invest $2.55 billion in Historically Black Colleges and Universities, Hispanic-serving Institutions, Tribal Colleges and Universities and other Minority-Serving Institutions.
  • Make federal student loans more manageable to repay by strengthening an Income-Based Repayment program which reduces the cap on borrowers’ monthly federal student loan payments from 15% to 10 % of their discretionary income after 2014.
  • Give students the support they need to stay in school and graduate.  The provisions invest $750 million in the College Access Challenge Grant (CACG) program which provides grants to organizations which help students acquire the skills they need in order to succeed in college and manage their student loans, such as financial literacy and debt management skills.
  • Prepare students and workers for competitive jobs by investing $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs.

“This is good for students, taxpayers, and American jobs,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.”

By riding shotgun on the fast-track health care bill, both bills are expected to move quickly through the Senate where, under reconciliation, they will be debated for a maximum of 20 hours, and require a simple majority for passage.

6 Responses

  1. Well if you vote against health care you are voting against education.

  2. Why do they have to be bundled together? I mean, why can they not have both an education AND a health care bill?

    It’s a nice way to get people to look bad if they disagree with one… “OH, you mean you are against education?!”

    I would much rather vote separately for these… I’m all for the education bill, but I have yet to see how that money will be spent exactly, however, it does seem like a step in the right direction. We certainly do not want to make it more difficult for people to afford education!

    • They go hand in hand, if you don’t increase the amount of doctors to deal with the predicted influx of patients we would have a problem. We have a problem now due to doctors specializing instead of practicing primary care… so the bill forgives student debt these doctors rack up if they commit to practice primary care.. It address medical school funding on both sides, students and universities. So you cannot do these separately. That’s like saying let’s separate the airforce from the marines and run them to war right after each other.. NO! NO! They work better together when they are coordinated. Maybe a weak example but I was getting a principle across

  3. Unfortunately, there are MANY students who do not belong in college and are wasting money being there. If this administration had any sense whatsoever, they would do something about increasing trade schools.

    Student loans do NOT belong in a health care bill and the comment by Keiron Jackman (“if you vote against health care you are voting against education:) is simply absurd! This horrendous bill had a dual purpose — to take over student loans and ALSO health care. What a shame for the United States.

    This administration is unquestionably destroying the United States, whether intentionally or not. (I haven’t decided yet which is the case.)

    • It would be a bigger disaster to NOT add funding for education or protect our nation’s health, so this is destruction-prevention for the long term, Mr. Conservative. But you are on the money with the trade school idea and statement about ill-prepared and unqualified students in the system. I went to college for the first time in my life 12 years ago and I was amazed at the number of people who were overwhelmed by the basic courses. Some folks are just better equipped to learn trade skills. I tried the latter and was below average; I always enviously admired those who mastered it easily. I went to school for dem booksmarts kinda learnin’ and ended up in grad school. Better skill evaluation/career advisement is needed here as well. These new bills are not perfect, but are a step in the right direction. They need to be tinkered with as flaws emerge. Health care needs to follow the Euro model to eliminate corporate profits and cut the costs. Think of it in simplist terms: with approximately 1700 health insurance companies in the US with, say three upper mgmt. positions (CEO-types) who might combine an average of $10 million total annual salary and you get $17 billion saved from the health care program! That’s 20% of the entire package, man!

  4. Also, keep in mind that the federal student loan program was always a federal program – established and subsidized by the Federal Government – hence the name the FEDERAL financial aid system.

    However, the system is broken and needs to be fixed. The program now depends on taxpayer dollars not just for subsidies to reimburse lenders when borrowers default, but also for capital to finance the lending. Taxpayers now fund $8.8 of every $10 in federal student lending activity. Why keep pumping taxpayer dollars into a broken system when the federal government can provide the same loans more reliably and at lower costs to taxpayers?

    See: http://edlabor.house.gov/documents/111/pdf/publications/20100318SAFRAmyth_fact.pdf

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