Students, groups split over role of loans in aid

In anticipation of the reauthorization of the Higher Education Act, lawmakers have begun to see a growing rift between college leaders, who want to increase the maximum amount that students can borrow through federal student loan programs, and student-interest groups, who oppose such an increase.

Both President George W. Bush and the House of Representatives have developed plans for increasing loan caps, which limit how much students can borrow through government-subsidized programs. Under the House bill, the limit for freshman students would increase from $2,625 to $3,500 and sophomore limits would rise from $3,500 to $4,500. The president’s plan is similar, except it would also increase the overall total an undergraduate can borrow from $23,000 to $24,875.

However, College Parents of America, a national advocacy group that represents parents of college students, universities and other interested corporations, would like an even larger change, increasing the total to $30,000 and giving students more flexibility in how much they could borrow each year.

“Borrowing only gets you so far under the present federal limitations,” CPA President James A. Boyle said. “The limits currently in place are so outdated as to cause students to borrow from private lenders, which are more dangerous and certainly more expensive.”

To accommodate rising tuition prices, the group has backed plans for increasing the amount students can borrow.

“Students will be borrowing a lot in the foreseeable future,” Boyle said. “We believe loan limits should be increased more dramatically.”

Some student groups, however, believe that increasing loan limits would place grants — their real priority — in the background.

“Loans are not the answer; they are only making it more difficult for students, especially after they graduate,” A.S. President Jenn Pae said. “Students are supposed to be getting financial aid in grants.”

The American Association of Community Colleges has also split from other higher education interest groups and announced its opposition to an increase in student loans.

“We’re not supporting an increase in loans, because we’re concerned about our students over borrowing,” AACC Vice President for Government Relations David Baime said.

However, UCSD Director of Financial Aid Vincent De Anda said he disagrees with the association’s perspective.

“If it were a zero-sum game, then students would have a point, but I don’t think that’s the way it works,” De Anda said. “If we keep the current loan maximums, it doesn’t follow that we’ll see an increase in Pell Grants. We’re just working on one program at a time and trying to increase the package all the way around.”

Both De Anda and Pae said they agree that something should be done soon to fix the financial aid problems faced by many students. Between 11,000 and 12,000 UCSD students have loans of some type and about 90 percent of these have federal Stafford loans, according to De Anda.

Though federal loans limit the amount of interest lenders can charge students, private loans do not have similar protections.

“Most of our students are reaching the current limits fairly quickly and having to take out less attractive loans,” De Anda said.

Students opposed to increasing loan limits have offered several suggestions as to how the federal student loan programs might be improved. A common point of criticism has been loan origination fees, charges paid by the borrowing student to the private lender for administrative costs.

“I’m pulling in all of these loans, but I’m going to have to pay back twice as much or more with interest rates because of loan origination fees and the money given to the middlemen,” Pae said.

Groups like the United States Student Association are also lobbying for loan forgiveness programs, which allow the federal government to eliminate all or part of a loan under special circumstances, such as when a student does volunteer work or serves in the military.

USSA has also heavily touted the Student Aid Reward Act. The act could save billions of dollars by allowing students to borrow money directly from the government, instead of having the government subsidize loans made by private lenders. A supporter of the S.T.A.R. Act, Pae said she sees it as a solution to at least some of the problems presented by federal financial aid.

“It is the state’s responsibility to make sure they’re providing affordable education, as a public institution,” Pae said. “If we can’t afford to come here, what is the point of public education?”