The future for some Cornell students receiving federal financial aid suddenly appears somewhat less burdensome. Dwarfed by the massive health care overhaul last week, the Student Aid and Financial Responsibility Act passed through Congress Thursday, representing a landmark in education reform and ending a congressional debate that dates back to last July. The bill was not approved uncontested, however, as it narrowly passed the House with a vote of 220-207 and the Senate by 56-43.
The legislation, signed into law by President Obama on Tuesday, will end the Federal Family Education Loan (FFEL) program, under which banks made government subsidized loans to students at the expense of taxpayers, who assumed the risk of those loans. From now on, all federal loans will be directly lent from the government, a measure that the Congressional Budget Office estimates will save tax payers $61 billion over ten years and reduce the deficit by $10 billion in the same timeframe.
More immediately, the bill will reinvest $36 billion of the savings towards increasing the maximum amount of money that can be awarded to Pell Grant recipients from the current limit of $5,550 to $5,975 by 2017. According to Thomas Keane, the Director of Financial Aid for Scholarships and Policy Analysis, 13.7 percent of Cornell students currently receive these need-based grants.
The legislation will also decrease the back the loan after school. Currently, students are required to pay back a minimum of 15 percent of their discretionary income for each payment. By July 1, 2014, this minimum number will drop by 10 percent.
Students will also see their loan balances forgiven sooner. For public service employees, borrowers will be relieved of all debt after 10 years of timely payments and all other sectors will be absolved of their existing balances after 20 years. The current law forgives student debt only after 25 years for all employees.
These changes come in addition to the fact that borrowers will no longer be subject to the higher interest rates of government-subsidized loans, which spiked during the recent financial crisis. Under the new system, the interest rate will be fixed by the government.
Whether the bill will actually increase the amount of grants given to Cornell students is less certain.
“The increased award amount is good news for Cornell, but I don’t think it will influence the number of Pell Grant recipients at Cornell much. I think the Pell increase will be most beneficial to students who don’t see how they can afford to go to college at all.” Keane said in an e-mail.
The government maintains, however, that approximately 820,000 new grants will be awarded by the 2020-2021 academic year.
The infusion of money into the Pell Grant program is more likely to directly affect community colleges and institutions with mainly minority student bodies, who will receive a $2 billion and $2.55 billion investment in competitive grants that aim to develop educational and career training programs, respectively.
“While the maximum Pell Grant represents about 10 percent of the cost of the endowed colleges at Cornell, for a student attending community college while living at her parents home, the Pell Grant could cover all of her tuition and books for the year,” Keane stated.
Original Author: Joey Anderson