House Approves Sweeping College Aid Reform

Sep 17, 2009 Issues: Education
(Washington D.C.)- The House of Representatives voted today to make the nation’s largest investment ever in student financial aid.   The Student Aid and Fiscal Responsibility Act (SAFRA) will raise the maximum Pell Grant award, simplify the student financial aid application process, and begin the community college initiative President Obama proposed while at Macomb Community College.  The legislation, which is fully paid for, passed by a vote of 253 to 171.

“This bill makes college more affordable for Michigan families and prepares our students and workers for the 21st Century,” said Rep. Levin, who co-sponsored the legislation.  “Additionally, these reforms end wasteful subsidies, making student aid more efficient and lowering the overall cost of the program to taxpayers.”

The legislation saves taxpayers $87 billion by ending wasteful subsidies to private lenders and invests those savings in community colleges and college students.  Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program.  In total, $77 billion of the savings from this change will go directly to education, including the American Graduation Initiative to improve rates of college completion and competitive grant programs to improve the quality of college education.  Funding will also be made available to modernize and repair community college and K-12 facilities.  

The legislation expands access to college for thousands of displaced workers and low-income students by providing $40 billion to the Pell grant program, increasing the maximum award to $6,900 by 2019, and providing an additional $6 billion for Perkins loans.  Simplification of the FAFSA, the form used to apply for student loans and grants, will allow applicants to use information directly from their tax returns, making it easier for families to apply for financial aid.  The interest rates on subsidized federal student loans will be made variable, preventing the rates from jumping to 6.8 percent from 3.4 percent in 2012 as currently scheduled. 

The nonpartisan Congressional Budget Office found that even while accounting for the increased aid to students and colleges, the legislation returns approximately $10 billion to the U.S. Treasury over ten years.