Visual Guide to the Student Aid and Fiscal Responsibility Act
Found faces help explain the up’s and down’s of the newest student aid bill proposed in the House.
By Pedro de la Torre III
July 23, 2009
Rep. George Miller introduced HR 3221—the Student Aid and Fiscal Responsibility Act (SAFRA)—in the House of Representatives last week. This bill would represent the largest investment in higher education in US history while managing to reduce the deficit, and is designed to take a big step toward President Obama’s pledge to make the US the most educated country in the world by 2020. The bill, which closely tracks a proposal by the Obama administration, would eliminate wasteful subsidies to student loan companies, and use the $87 billion in savings to make college more affordable, accessible, and effective.
This is a big piece of legislation with many provisions, and there are a few parts of the bill that should be strengthened, even if it is on the whole one of the best higher education proposals we have seen for a very long time. Rather than a dry, colorless factsheet, we thought some expressive faces would help to explain the bill’s pros and cons.
Affordability
Flickr: valkiribocou
invests $40 billion to
increase the maximum Pell grant award to $5,550 by 2010, and $6,900 by 2019. A
recent report by US
PIRG and the Institute for America’s Future estimated that this would mean an additional 260,000 students receiving Pell grants, and larger grants for existing Pell recipients.
Flickr: kidbelz
The value of the Pell grant relative to college costs has decline precipitously during the past few decades.
SAFRA would help the grant keep up with college costs by creating a floor below which the maximum grant level must not fall – inflation plus 1%. This will make the grant more reliable for students and families.
Flickr: the3robbers
In 2007, Congress
slashed interest rates on subsidized Stafford loans, but these reforms are set to expire in 2012, causing the interest rates on these loans to jump from 3.4% to 6.8%.
SAFRA would make the interest rate variable, but cap the rate at 6.8%, which means borrowers will be able to benefit from low interest rates while being protected from high rates.
Access, Completion, & Quality
Flickr: kidbelz
would create a competitive grant program for community colleges to create programs that would improve completion rates, improve instruction, create partnerships with employers, and implement other reforms. It will also invest in modernizing community college facilities and create a grant program for the creation of quality online college, high school, and job training classes. The goal is to graduate an
additional five million students during the next ten years. Finally, it would invest billions in minority-serving institutions to expand the number of minority
STEM graduates and other purposes.
Flickr: jili’m
will invest these funds in the
College Access Challenge Grant program, which funds state, local, and federal projects that help get low income students ready for college, able to navigate the admissions and financial aid process, and earn their degrees. In addition, these funds will be used to support programs at both the state and institutional level to that focus on improving college completion rates and financial literacy.
Reforming the Federal Financial Aid Programs
Flickr: ntrolls
Right now there are
two different federal programs that award the same types of loans to students: the Federal Family Education Loan program (
FFELP), and the Direct Loan Program (
DLP). The
FFELP has consistently been found to be more expensive to taxpayers than the
DLP, since it uses subsidies and loan guarantees to persuade loan companies to act as middlemen. The
FFELP is also more prone to corruption, backroom political deals, and instability during economic crisis (as we have seen recently).
SAFRA would originate all future federal loans from the
DLP.
Flickr: Andy*Matthews
In order to win support from lawmakers with powerful non-profit loan companies in their state, bill authors included a provision that would award these lenders
no-bid contracts to service student loans. Each company would automatically get to service the loans of
100,000 borrowers or every borrower in their state (if the state has fewer than 100,000 borrowers), and in some states there would be more than one eligible lender. Students and taxpayers would be better served if servicing contracts were based on a bidding process based on cost and quality, rather than political calculation. One lender that may be eligible was recently featured in the
Students Over Banks Hall of Shame.
Flickr: dan mogford
would finally make the
FASFA less of an onerous burden on students and families by removing unnecessary questions and allowing families to use information from their tax returns to fill out some parts of the application.
Pinching Pennies
Flickr: vivid Breeze
will direct $10 billion saved from cutting wasteful subsidies to student loan companies to the US Treasury in order to pay down the deficit.
The top 20 lenders have already spent $4,665,000 on lobbying since January, and they represent only a miniscule fraction of all student loan companies. They strongly opposed this legislation, so Congress needs to hear from you – take action now at Studentsoverbanks.org!
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Pedro de la Torre III is an advocacy senior associate at Campus Progress.
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Comments
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Where did you figure the $4.6 M figure for the top twenty lenders? That’s incredibly interesting to me.
— Meghan Kurtz - Oct 14, 08:57 PM - #