Student loan bill clears U.S. House

On Thursday, the U.S. House of Representatives passed the Student Aid and Fiscal Responsibility Act of 2009 (SAFRA), which does away with taxpayer subsides to private lenders in the student-loan business, saving taxpayers $87 billion, according to Congressional Budget Office calculations. By cutting out these middlemen, the government will increase the amount of money available to those who qualify for the Pell Grant and Perkins Loan programs, as well as subsidize other educational initiatives.

Inside Higher Ed offered a list of the bill's major initiatives:

  • Provide $40 billion over 10 years to increase the maximum Pell Grant to $5,550 and ensure that it would increase annually by the rise in the Consumer Price Index plus 1 percent.
  • Greatly expand and alter the criteria for the Perkins Loan Program.
  • Pour $10 billion into community colleges in support of President Obama's American Graduation Initiative, designed to produce 5 million more two-year college graduates by 2020.
  • Spend $8 billion over 10 years to strengthen early childhood education.
  • Create a College Access and Completion Fund that would give grants to states and institutions with innovative approaches to increasing college going and graduation.
  • Provide $4.1 billion to modernize and repair school and college facilities, including those damaged by Hurricanes Katrina and Rita.
  • Make the interest rates on federal student loans variable beginning in 2012, when they are set to rise back to 6.8 percent.
  • Simplify the federal financial aid form.
  • The bill also has broad repercussions for students who are military veterans, according to the Marine Corps Times. Among other provisions that aid veterans,

    Also included is a provision that would provide grants for institutions to hire veterans resource officers to work as advocates for student-veterans. Grants would be available for colleges and universities that have 100 or more full-time students who are veterans.

    You can watch video commentary by key House Democrats on the bill at the blog of the Speaker of the House.

    One big concern is how well the federal government will be able to service the loans under a direct lending paradigm, as it takes considerable infrastructure to do so. Part of this infrastructure is already in place through the Department of Education (through whose website I make my own monthly student loan payments), but there's a good deal of understandable concern that lending processes will get bogged down by unnecessary bureaucracy. I think simplifying the FAFSA, the Free Application for Federal Student Aid, will go a long way toward reducing the anxiety and frustration parents and/or students feel about the process of borrowing money to pay for college or graduate school.

    Countless bloggers have weighed in on the bill's passage--voting on which was largely along party lines. Not surprisingly, so runs the commentary on the bill.

    Deb Cupples of Buck Naked Politics explains the ways the bill will save taxpayer money, and expresses her disbelief that Republican representatives opposed the bill:

    It's downright bizarre that so many Republican politicians claim to be business oriented while failing to grasp a simple, business principle: cutting out a middleman saves money. Put another way,

    Every tax dollar spent subsidizing a private lender's overhead, employees' salaries, profits, and corporate jets is one less dollar to actually lend to college students.

    And legitimate middleman-costs are only part of the equation. Waste, fraud, and abuse on the part of private lenders added even more to the taxpayers' tab.

    Check out this page at Higher Education's "New America Foundation" for links to stories about apparent corruption, including kickbacks, conflicts of interest, and luxury trips -- all of which cost money and may have been directly or indirectly subsidized by us taxpayers.

    Definitely click through to that New America Foundation link Cupples mentions. It contains a huge, and eye-opening, compendium of links detailing abuse and fraud by private lenders.

    The University of Oklahoma student newspaper cited concerns by two Republican Congresspeople from that state:

    “Abolishing the Federal Family Education Loan student loan program in order to institute a government-run lending program that pulls dollars from the already overdrawn U.S. Treasury is a mistake,” Rep. Cole, who represents Norman, stated in an e-mail. “This is just another fundamentally flawed government takeover.”

    Cole stated the legislation that was passed is similar to the health care bill in that he stated the student loan industry would be destroyed from a “public option.”

    “It will cost taxpayers billions, eliminate private jobs and make students and colleges more dependent on the federal government.”

    Rep. Fallin stated in a press release that the bill creates more bureaucracy for citizens and turns the U.S. Department of Education into a large bank.

    “The government already owns our mortgages, car dealerships and banking institutions,” Fallin stated. “Now they want to control the student loan market as well, managing over $1 trillion in capital over the next ten years and eliminating college financing choices for students. If this bill becomes law, students will be stuck standing in line in another massive bureaucratic system, just like the Internal Revenue Service or Post Office.”

    Lindsey Burke, writing at The Heritage Foundation's blog The Foundry, wonders why there's funding for pre-K programs in a higher education bill. After all, nothing unrelated to the main purpose of a piece of legislation ever makes it into a bill, right? [end saracasm] In her post, Burke tries to draw a connection between the government spending Head Start funds and the decline in high school graduation rates, as if nothing else might influence those graduation rates. As someone who has spent all of her adult life in higher education, and who comes from a large extended family of educators, I find this kind of facile reasoning and light analysis very frustrating--although blogging, as we all know, can lend itself to quick writing rather than deep thinking. (Ahem.)

    Many conservatives are calling SAFRA the educational equivalent of the health care bill. There are superficial comparisons to be made, but borrowing for college is a significantly different, and far less complex, activity than coordinating the health care of oneself and one's family. I have to admit I laughed out loud when I read this bit from Michelle at Richmond Patriots:

    So what does the [bill] mean for the everyday citizen? It means that the Federal Government is going to control our schools. Period.

    Hahahahahaha! Have you ever met university faculty? Furthermore, Michelle's assertion that

    They are making the loans, they will decide who, how and where the money goes. Just like with the national speed limit withheld money from states that did not comply, they can withhold money from the institutions that do not comply.

    ignores the entire nationwide system of regional accrediting bodies, which hold far more sway over institutional priorities, particularly regarding undergraduate education, than does the federal government. In addition, private aid from corporations and individual donors also have proven incredibly persuasive in whether or not departments and programs continue to get funded. (Sorry, foreign languages. Good news, bioengineering!)

    The American Association of University Women Dialog blog explains the bill's impact on women:

    While this bill will help all students, women in particular stand to gain. As we know all too well — and as the Census Bureau recently reminded us — women earn significantly less on average over the course of their lives than their male counterparts. AAUW’s Behind the Pay Gap report found that college-educated women earn 5 percent less than men one year out of college and 12 percent less than men 10 years out of college, even when they have the same major and occupation as their male counterparts and when controlling for factors known to affect earnings such as education and training, parenthood, and hours worked. These findings suggest that sex discrimination not only continues to be a problem in the workplace, but that it affects the incomes of even the most educated women starting immediately out of college. This immediate and pernicious wage disparity makes it that much harder for women to repay their student loans. Women also stand to gain from an amendment to the bill that focuses on the need to have more women and underrepresented minorities enter science, technology, engineering, and math (STEM) careers.

    RDemocrat at Hillbilly Report sees hypocrisy on the part of Kentucky Republicans who voted against the bill:

    I think this once again properly demonstrates the hypocrisy of Kentucky Republicans and the Republican Party as a whole. They constantly lecture us on spending, but they care little about money being wasted as long as it is being wasted on corporate welfare. When presented with a chance to both save money, and help working poor children afford college, they would rather waste that $80 billion.

    Personally, I'd be interested in seeing a survey of how House Reps and Senators paid to send their children to college, and where those students matriculated. How many of them required student aid? How many of them sent their children to schools in their own state? How many of their kids went to private school? How many of their loans originated with private lenders, and how many used the government's existing direct loan programs? Such data might reveal some interesting patterns of decision-making, letting us know not only how these bills will affect representatives' constituents, but also how their own experiences influenced their votes.

    Regardless, it was time to revisit the federal student aid program because, as reported by the Economic Populist, student indebtedness increased 25% over the last year, which contributes to the (to me) startling statistic that one-third of workers younger than age 35 live with their parents. Institutions of higher education, state governments, and the federal government need to find ways to make education more affordable to all students so that their indebtedness doesn't affect their life decisions more than 10 years after graduation. (Me, I'm on a 20-year repayment plan, which means my husband, son, and I don't have to move into my parents' garage.)

    Underlying all of the political rhetoric on both sides is a question that has gone unasked, at least explicitly: Do all these students need to go to college? The objectives of a college education vary from institution to institution and from student to student, so this question can't be answered easily, nor should it be addressed lightly. Those of you who have read my posts, and know that I work at a highly diverse public institution of higher education, probably can divine my answer to this question. But I'd love to hear your thoughts: Who should be going into debt to get an education, under what circumstances, and why?  What are your own experiences, either as students or as parents?

    Leslie Madsen-Brooks develops learning experiences for K-12, university, and museum clients. She blogs at The Clutter Museum, Museum Blogging, and is the founder of Eager Mondays, a consultancy providing unconventional professional development.

    This is an article written by one of the incredible members of the SheKnows Community. The SheKnows editorial team has not edited, vetted or endorsed the content of this post. Want to join our amazing community and share your own story? Sign up here.

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