The Final Tally On Student Aid Reform Marks A Win for Students

By Julianne Hing Mar 22, 2010

The quiet news from last night’s historic passage of the health care bill is that student aid reform was also passed alongside it. In the last week, joining student aid reform (initially introduced to Congress and commonly known as SAFRA) with health care reform had been portrayed as a last-ditch effort to save the bill. But Rep. Joe Courtney said on a conference call with reporters last week that passing the student aid bill through reconciliation was part of the plan all along. And because reconciliation is only allowed once per fiscal year, when it all came down to the wire, it became a now or never situation for SAFRA. What Courtney and other politicians and student advocates have also noted was that if student aid reform had not passed the House, it would have meant immediate cutbacks in Pell grants for millions of students. According to Greg Cendana, the president of the United States Student Association, Pell Grants currently face a $50 billion shortfall. "There was a severe underestimation of how many students would qualify," said Cendana, adding that as tuition costs have increased, so has students’ need. If SAFRA hadn’t passed, the 8 million low-income students who depend on Pell Grants would have faced a possible 60 percent cut to the amount of they would have received, from the maximum grant award of $5,550 SAFRA allows to $2,150. Students are enrolling in college at record rates–due partly to demographic trends and the high numbers of people headed back to school because of the recession–and so many more people today qualify for federal aid. "They’re scrambling to find the money to pay for the new demand," Cendana said. Ultimately, the only feasible and plainly logical way to free up money for Pell Grants was to shift how loans are provided to students in this country. SAFRA ends government subsidies for private companies in the student loan industry and institutes direct lending through the Department of Education, and will free up $67 billion in the process. Thirty-six billion of that will go to Pell Grants over the next ten years, and sets up automatic increases in the maximum Pell grant award. And $2.6 billion will go to HBCU’s, Latino-serving institutions and Tribal Colleges, fulfilling a promise made by President Obama earlier this year. Another $2 billion will go toward grants at community colleges for training workers who’ve been dislocated or face job loss. Interestingly, this line item was included in last year’s stimulus, but never funded. Now it will finally be instituted. The Income-Based Repayment Program, a federal student loan forgiveness program, will be expanded for new borrowers and College Access Challenge Grants will receive $750 million. The concessions are deep though. That $750 million for CACG? In the House-approved bill from last September, that figure was actually $3 billion. And another $10 billion that was slated to go to construction projects and early education programs was cut out, too.And even though the new Direct Loan program eliminates the private lending middle men, private loan giants like Sallie Mae and NelNet were able to squeeze in contracts with the government to service loans. You didn’t think those companies would let a little thing like student loan reform get in the way of their $92 billion a year industry, did you? All told though, the passage of this bill marks a significant win for students. Most disconcerting are the patented lies still being spread by folks like Sen. Ben Nelson, a Democrat from Nebraska who said today that he will vote against the reconciliation bill when it arrives in the Senate this week. He opposes the so-called "government takeover of student lending," referring to the shift from government-backed private lending to direct lending for students. In doing so, Nelson misses the point entirely: student lending were always backed by the federal government. The government already took over student lending. In 1965. What Nelson is really lamenting is the fact that loan giants (and big time donors to the Nelson campaign) Sallie Mae and NelNet, won’t be getting over $60 billion in government subsidies anymore. To which I say: students in America need this money more. photo credit: