Its a good week to be a student!
In that past week, we have witnessed the passage of a revolutionary health care bill as well as vital student aid reform. Both overhaul their respective systems, placing a focus onto patients and students rather than insurance companies and big banks. While the focus of the debate around reconciliation was on the health care aspect of the bill, it is important for students to know how the loan industry will change will the passage of student aid reform.
- Students will see increases in the Pell Grant. For the practically 30 percent of students at UC Berkeley who rely on Pell Grants, the maximum award will increase to $5,550 in 2011 from $5,350 this year. The bill provides $13.5 billion to cover the Pell Grant shortfall, which is comprised of growing need and annual underfunding, and another $22.5 billion to cover the increases. These changes are vital to the UC system, especially UC Berkeley, because according to the Center for Studies in Higher Education on campus, “the UC campuses of Berkeley, Davis, and UCLA each have more Pell Grant students than all the eight Ivy League institutions combined.”
- Another major change students will see is the closure of the Family Federal Education Loan Program (FFEL), a program where the federal government subsidizes banks billions of dollars to lend to “risky” students. What’s even worse is that the federal government even guaranteed the loans up to 97%, which left banks with little to no risk. Instead, loans will be originated through the Direct Loan Program, which will save taxpayers and the federal government close to $60 billion over 10 years.
- Community colleges will also receive a boost in federal funds. Student aid reform invests $10 billion in community colleges to focus on modernization and online education. In California, we have one of the best community college systems in the country, which allows students to receive Associate degrees as well as transfer to four-year universities. An increase in funding will only strengthen this system and allow more students to reap the benefits community colleges have to offer.
- Minority-serving institutions (MSI’s) receive $2.5 billion over 5 years as well. These institutions include historically black colleges and universities as well as tribal colleges.
- $1.5 billion will go towards the Income-Based Repayment Program, which allows students to set their monthly payments on their student loans based on their income.
- Student aid reform also simplifies the FAFSA application by removing questions regarding drug convictions and financial assets. 22 questions and 17 web screens will be removed.
Because the reforms were included in reconciliation, student aid reform also reduces the deficit by nearly $10 billion by eliminating federal subsidies to banks. With increases to many federal education programs, student aid reform puts students first and shows our country that affordable education is a right for all, not a privilege for few.
For further questions, the United States Student Association and the House Committee on Education and Labor both have more information online about student aid reform.