House passes bill that could affect federal aid
By Samantha Masunaga
Sept. 28, 2009 1:46 a.m.
A bill recently passed by the House of Representatives could result in one of the largest overhauls of the nation’s student aid program.
Passed by a vote of 253-171, the Student Aid and Fiscal Responsibility Act (H.R. 3221) will eliminate the Stafford Loans provided through the Federal Family Education Loan Program while simplifying the Free Application for Federal Student Aid and funding new federal loan programs.
The Federal Family Education Loan Program is currently administered by banks and serves as UCLA’s student loan program, said Ronald Johnson, director of financial aid at UCLA. As a result, Johnson said UCLA will transition to direct lending through the federal government for the 2010-2011 school year.
The savings from the cut will increase funding for the Pell Grant Program, according to a statement from the National Association of Student Financial Aid Administrators.
The federal Pell Grant Program provides financial aid for low-income students throughout the country, according to the Pell Grant Web site.
“While we are supportive of the increased funding for Pell Grant, there are aspects of this bill that cause great concern,” Johnson said.
His concerns include the inclusion of a new Federal Direct Perkins Loan Program, which will convert a subsidized loan with principle and interest payable six months after graduation to an unsubsidized loan. The new loan will accrue interest while the student is enrolled in school, Johnson said.
By eliminating the Federal Family Education Loan Program, the measure opens the door to greater federal involvement in loan funding while pushing private lenders out of the sector.
As a result, schools will be req0uired to administer Stafford Loans only through the Federal Direct Program.
“This legislation makes important investments to help make college affordable and accessible for all eligible students,” said Melissa Salmanowitz, spokeswoman for the Education and Labor Committee. “It will help us transform our student aid programs so that they finally operate in the best interests of students ““ not banks ““ and help relieve the burdens of overwhelming debt.”
However, others are more skeptical of the move.
“This will essentially eliminate students’ and family’s choice of their lender provider ““ all students will be required to borrow Stafford Loans through the Federal Direct Loan Program,” Johnson said. “Though some schools will be able to accommodate this transition it’s unclear whether all schools (approximately 4000+) will be able to receive the technical support needed from the federal government to accommodate this massive conversion.”
Johnson added that in the past, students have benefited from lower interest rates and various discounts that are not available through the Federal Direct Loan Program, although he said that the federal program would provide greater security.
However, the bill still needs to be approved by the Senate by Oct. 15. After that, the final bill could be approved as late as December, right before Congress adjourns.
Although the bill involves serious changes to financial aid, Johnson said that students should be able to transition fairly easily.
“From the student view, it should be a seamless process,” he said. “It’ll be different, but fairly seamless.”
He added that students should stay updated on the legislative process by going to congressional sites and reviewing the information regarding the measure.
“It has a long way to go before it’s final … but students need to be aware of the legislation,” he said. “There are a lot of steps to be taken before it becomes law.”
To review the bill, visit the Open Congress Web site at
http://www.opencongress.org/bill/111-h3221/show.
