Financial Aid Bill on Senate evaluation

By Amanda Curry, The Daily Vidette/UWire

Published Oct. 1, 2009

ILLINOIS STATE UNIVERSITY -- Last week, the House of Representatives passed legislation that expands federal aid to college students while ending federal subsidies to private lenders.

The vote in the House of Representatives was 253 to 17. The Student Aid and Fiscal Responsibility Act moves to the Senate where legislation should be decided upon by the beginning of October. Democrats expect success in the Senate.

Ross Hodel, director of the Illinois State University center for the study of educational policy, said, “This is basically an Obama administration initiative to take the private sector out of the student loan business and put it into the hands of federal government and universities.

“I’m guessing the Senate will probably keep some agencies involved in some fashion,” he said. “There will be a reduced role for student loan agencies, but how greatly reduced it is not certain.”

According to an article published in the New York Times, under the current program, the government pays subsidies to lenders and guarantees all loans. All colleges would be required to convert to the federal direct loan program by July 1, 2010.

“Four or five years ago about half of Illinois institutions, including ISU, were direct lending institutions,” Hodel said.

“Student loan money came from the federal government and this has slowly increased in Illinois, between a third and a half are still using private sectors.”

Hodel explained this should not be a surprise to students in Illinois, because they already depend on direct lending.

“The typical ISU student will not have any difference because ISU is a direct lending institute who works with government already, but some transfer students will have minor issues.”

Nancy Israel, senior English education major, said, “I will be graduating after this year so I will not be affected by the new bill. However, I think that the new bill, if it passes, is going to be very beneficial to anyone who wishes to go to college but doesn’t have the necessary resources.

“If a student is rejected from receiving a private loan it will not prevent them from attending school,” she said.

The Obama administration believes the transition to direct federal lending would save more than $80 billion over 10 years. This money would go to Pell grants for low-income students, new investments in community colleges and other education efforts.

The legislation includes about $10 billion for community colleges, $8 billion for early-childhood programs, $2.55 billion for historically black colleges and universities and additional money for both work force training programs.

There are also stipulations to strengthen the Perkins loan program and reduce the number of questions on the Free Application for Federal Student Aid [FAFSA], the form students must fill out to apply for federal financial aid.

Republicans and private lenders have categorized the legislation as an invasive government takeover that takes away the option of consumer choice. These are the same arguments presented to the health care reform.