Loan reform won’t greatly affect college
The final version of the hotly debated health care bill that passed last month included a provision which may seem out of place – student aid reform aimed to get rid of private lenders for student loans.
Originally its own proposal, the bill known as SAFRA was passed on March 21 during the reconciliation process of the health care bill.
U.S. Reps. Timothy Bishop, D-N.Y., and Joe Courtney, D-Conn., who sit on the Education and Labor Committee, held a conference call just days before the bill was enacted to explain how it would work.
“It moves to 100 percent direct lending,” Courtney said. “It will save taxpayers approximately $67 billion over 10 years.”
Besides direct lending, the bill will increase Federal Pell Grants to $6,000 by 2017. Grant maximums for next school year will rise to $5,550. Currently that cap is set at $5,350. Both Courtney and Bishop emphasized that more money will be available for those entering community colleges, not necessarily traditional four-year or private colleges.
Franklin College’s Director of Financial Aid Elizabeth Sappenfield said 27 percent of Franklin students qualify for Pell Grants.
“It is a great thing that the Pell Grant will be increased, but I don’t think that the anticipated increases in that program will greatly impact the affordability of a private education,” she said.
While private colleges and universities may not see a change in enrollment because of the bill, banks and private lenders may see a decrease in jobs.
“Until this winter, every Franklin student who borrowed a Federal Stafford loan – 85% of our student body – utilized a private lender for those loans because Franklin participated in the FFELP (Federal Family Education Loan Program) loan program,” Sappenfield said. “We have already seen several lenders struggle and ultimately get out of the student loan business because of the anticipated transition.”
The highest-rankling Republican on the Education and Labor Committee, Minnesota Rep. John Kline put the job loss estimate at 30,000 in a statement released after the bill was signed.
“By replacing a popular student loan model with yet another one-size-fits-all government bureaucracy, the bill sacrifices innovation and competition in student financial assistance,” he said.
But Bishop insisted that “jobs will be protected” and that there “will be still plenty of work for banks” because those with established credit or a credit-worthy cosigner can still opt for private loans.
Sappenfield said that that the bill will impact the behind-the-scenes activity of financial aid more than anything, but that the office is prepared because they have anticipated this change for about a year. The only major change students should see is filling out an additional form.
“In the short term, the only change our students that borrow a Federal Stafford loan and parents who borrow a Federal Plus loan will see is that they will be required to complete a new Master Promissory Note for their loans next year,” she said. “So approximately 85% of our student body will have to go online and complete a new promissory note this spring or summer.”
Students will receive instructions on how to fill out the form in the coming weeks.
