Cutting-out the Middle Man
According to an article by the New York Times, Congress voted on Thursday, March 25 to force commercial banks out of the federal student loan market, redirecting the money to new education initiatives.
By taking the “middle man” out of the equation, UC Irvine’s Acting Director of Financial Aid and Scholarships, Christopher Shultz, believes this means more stable funding for Pell Grants. This includes the federal government’s increase in the cutoff for the expected family contribution.
More generically, the bill will direct $36 billion over the course of 10 years to Pell grants for students from low-income families.
While the bill appears to offer relief for higher education, the report shows that on an individual level, Pell grants only increase from $5,550 for the 2010-11 school year to $5,900 in 2019-20. This change is minuscule compared to the steep, inexorable rise in tuition for both public and private colleges.
Additionally, the new legislation requires students to take out loans through their college’s financial aid office instead of going through a private bank. This process of acquiring loans is known as the Direct Student Loan Program. Shultz noted that no change will occur to UCI’s program since it has been on direct student loans since 1994.
Assistant Director of Financial Aid and Scholarships, Olivia Garcia, reaffirmed that UCI students and staff, particularly the Financial Aid office, will not be effected by the legislation.
However, Shultz points out that the federal government might not be able to handle the volume of students that rely on loans despite its reassurances that it will be able to manage.
Tony Le, manager of the Wells Fargo branch on the UCI campus, points out that when money through FAFSA is not sufficient, students will still apply for a loan at a bank just like any other customer and be turned away if their credit is not satisfactory. Sharon Salinger, dean of the division of undergraduate education, feels optimistic about the bill and hopes it will give students greater access to UCI and steer education in a healthy direction.
Other benefits of the bill detailed in the New York Times report are making it easier to pay back student loans by reducing the share of income that a graduate must devote to loan payments, and accelerating loan forgiveness for those who take out new loans after July 1, 2014.
Furthermore the Congressional Budget Office said the direct-lending approach would save taxpayers about $61 billion over 10 years. Roughly $40 billion of the savings will be redirected to higher education. Education programs will get an additional $10 billion from the health care package. Perhaps higher education will finally receive a bit of relief, regardless how small.