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A bill recently approved in the House of Representatives would force colleges to overhaul their publicly funded student-loan programs ‘mdash; requiring a switch from government- subsidized private lenders to the Federal Direct Loan Program.
Passed in the House on Sept. 17, the Student Aid and Fiscal Responsibility Act would originate all new federal student loans through the Direct Loan Program starting next year, meanwhile eliminating the Federal Family Education Loan Program altogether.
The bill is designed to dramatically increase the number of college graduates in the United States by 2020.
‘No student in America should have to mortgage their future to get a good education,’ Rep. George Miller (D-CA), chair of the House Education and Labor Committee and the author of the bill, said in a statement. ‘This legislation provides students and families with the single largest investment in federal student aid ever and makes landmark investments to improve education for students of all ages, and all without costing taxpayers a dime.’
Supporters of the bill argue that the Direct Loan Program will insulate interest rates from changes in the economy, guaranteeing students access to affordable college loans.
According to estimates from the Congressional Budget Office, the bill will generate $87 billion in savings over 10 years by eliminating the cost of subsidizing private loans.
Additionally, the legislation will invest $40 billion to increase the maximum annual Pell Grant scholarship from its current amount of $5,350 to $5,550 in 2010 and $6,900 by 2019.
The bill would also support various college access and completion support programs, strengthen the Perkins Loan program, simplify the Free Application for Federal Student Aid application process, implement variable interest rates on need-based loans and provide loan forgiveness for members of the military who are called to duty in the middle of an academic year.
It would also provide funding to community colleges, public-school modernization and pre-kindergarten education.
‘Today the House made a clear choice to stop funneling vital taxpayer dollars through board rooms and start sending them directly to dorm rooms,’ Miller said. ‘This vote was a historic triumph for America’s students, families and taxpayers, and will ensure that their interests never again take a backseat to lenders and big banks.’
UCSD, UCLA and UCSF are currently the only UC campuses still using the Federal Family Education Loan Program. All others have already switched to the Direct Loan Program. Financial Aid Office Director Ann Klein said UCSD is currently evaluating its business processes to determine how to make the transition to the Direct Loan Program.
Klein said the bill would not greatly affect the availability of student loans.
‘If UCSD moves to the [Direct Loan] Program, students would still be able to receive student loans with very similar terms and benefits,’ Klein said in an e-mail. ‘Let us reassure our students that loan funds would be available if this bill passes and UCSD moves to the [Direct Loan] Program. Student access to loan funding would not be impacted.’
The Senate received the bill on Sept. 21 and referred the bill to the Committee on Health, Education, Labor and Pensions. It is awaiting approval in the Senate.