Startraveler Posted March 26, 2010 #1 Share Posted March 26, 2010 (edited) A victory today for anyone who likes to see wasteful government spending converted to useful government spending. Many moons ago (i.e. last September) the House passed a very important bill that makes big changes to the federal student loan system. I posted the details of that bill in this post. But, like many of the bills churned out by the hugely productive House this session, it looked like that bill would go on to die a quiet death in the Senate. Until the minority party threatened to object to conferees to a conference committee to hammer out the differences between the House and Senate health care bills. This prompted the majority party to write a final, merged health care bill outside of the conference committee process. In the meantime, the Senate election in Massachusetts reduced the Democratic majority in the Senate to 59, which made passage of a final merged bill through that body impossible. Which brings us to the idea of introducing a relatively small package of fixes to the Senate's health care bill that would appease the House and pass through the Senate through the budget reconciliation process, which allows bills full of provisions that directly impact the budget to avoid th filibuster. Why is this health care stuff relevant? Because the Democrats in the House decided to stick the main provisions of the student loan bill into that health care reconciliation bill. That bill passed tonight and will go to the president for his signature. Not only does this bring the health care reform saga to a close, it allows a bill that seemed likely to die in the Senate to become law. Funny to watch the series of unlikely events that converged to make this student loan bill law. So now we get stories like this: Congress Approves Obama's Overhaul of Student Loans: WASHINGTON, March 25 (Reuters) - An overhaul of the college student loan program, ending federal subsidies to private lenders, won final congressional approval on Thursday, giving President Barack Obama a second major legislative victory this week.Coming in the wake of passage on Sunday of Obama's landmark U.S. healthcare reform, the measure would end the 45-year-old Federal Family Education Loan Program, which has supported private student lending with federal subsidies. The program will be replaced by an expansion of direct federal lending to students, eliminating well-paid middlemen -- bankers and other private lenders who have also been shielded by taxpayers from the risk of default. The projected $61 billion in savings over 10 years would be used to provide federal grants to needy students and help fund other federal education programs, such as support for community colleges and historically black schools. . . You can find a summary of the education-related content of the reconciliation bill here. Since I'm pretty sure we have some college-age browsers (or at least parents of college-age browsers) here, I'll post the relevant part of the summary in its entirety: Title II – Health, Education, Labor, and PensionsSubtitle A – Education Section 2001. Short Title; References. Provides that this subtitle may be cited as the “SAFRA Act,” and that, except as otherwise provided, whenever an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Higher Education Act of 1965. Part I—Investing in Students and Families Section 2101. Federal Pell Grants. Amends the Higher Education Act to include mandatory funding for the Pell Grant. This provides additional mandatory funding to augment funds appropriated to increase the federal maximum Pell Grant award by the change in the Consumer Price Index. The mandatory component of the funding is determined by inflating the previous year’s total and subtracting the maximum award provided for in the appropriations act for the previous year or $4860, whichever is greater. Beginning in the 2018-2019 academic year, the maximum Pell award will be at the 2017-2018 level. Section 2102. Student Financial Assistance. This section provides $13.5 billion in mandatory appropriations to the Federal Pell Grant program. Section 2103. College Access Challenge Grant Program. This section amends section 786 of the Higher Education Act by authorizing and appropriating $150 million for fiscal years 2010 through 2014 for the College Access Challenge Grant program created under the College Cost Reduction and Access Act of 2007. Provides that the allotment for each State under this section for a fiscal year shall not be an amount that is less than 1.0 percent of the total amount appropriated for a fiscal year. Section 2104. Investment in Historically Black Colleges and Universities and Minority Serving Institutions. This section amends section 371( of the Higher Education Act by extending funding for programs under this section created under the College Cost Reduction and Access Act of 2007 for programs at Historically Black Colleges and Universities and minority-serving institutions through 2019, including programs that help low-income students attain degrees in the fields of science, technology, engineering or mathematics by the following annual amounts: $100 million to Hispanic Serving Institutions, $85 million to Historically Black Colleges and Universities, $15 million to Predominantly Black Institutions, $30 million to Tribal Colleges and Universities, $15 million to Alaska, Hawaiian Native Institutions, $5 million to Asian American and Pacific Islander Institutions, and $5 million to Native American non-tribal serving institutions. Part II—Student Loan Reform Section 2201. Termination of Federal Family Education Loan Appropriations. This section terminates the authority to make or insure any additional loans in the Federal Family Education Loan program after June 30, 2010. Section 2202. Termination of Federal loan Insurance Program. This section is a conforming amendment with regard to the termination of the FFEL program, limiting Federal insurance to those loans in the Federal Family Education Loan program for loans first disbursed prior to July 1, 2010. Section 2203. Termination of Applicable Interest Rates. This section makes a conforming amendment with regard to the termination of the FFEL program limiting interest rate applicability to Stafford, Consolidation, and PLUS loans to those loans made before July 1, 2010. Section 2204. Termination of Federal payments to Reduce Student Interest Costs. This section makes a conforming amendment with regard to the termination of the FFEL program by limiting subsidy payments to lenders for those loans for which the first disbursement is made before July 1, 2010. Section 2205. Termination of FFEL PLUS Loans. This section makes a conforming change with regard to the termination of the FFEL program for federal PLUS loans by prohibiting further FFEL origination of loans after July 1, 2010. Section 2206. Federal Consolidation Loans. This section makes conforming changes with regard to the termination of the FFEL program for federal consolidation loans. This section also provides that, for a 1 year period, borrowers who have loans under both the Direct Lending program and the FFEL program, or who have loans under either program as well as loans that have been sold to the Secretary, may consolidate such loans under the Direct Lending program regardless of whether such borrowers have entered repayment on such loans. Section 2207. Termination of Unsubsidized Stafford loans for Middle-Income Borrowers. This section makes conforming changes with regard to the termination of the FFEL program for Unsubsidized Stafford loans by prohibiting further FFEL origination of loans after July 1, 2010. Section 2208. Termination of Special Allowances. This section makes conforming changes with regard to the termination of the FFEL program by limiting special allowance payments to lenders under the FFEL program to loans first disbursed before July 1, 2010. Section 2209. Origination of Direct Loans at Institutions Outside the United States. This section provides for the origination of federal Direct Loans at institutions located outside of the United States, through a financial institution designated by the Secretary. Section 2210. Conforming amendments. This section makes conforming technical changes with regard to the termination of the FFEL program for Department of Education agreements with Direct Lending institutions. Section 2211. Terms and Conditions of Loans. This section makes conforming technical changes with regard to the termination of the FFEL program to clarify the terms and conditions of Direct Loans. Section 2212. Contracts. This section directs the Secretary to award contracts for servicing federal Direct Loans to eligible non-profit servicers. In addition, this section provides that for the first 100,000 borrower loan accounts, the Secretary shall establish a separate pricing tier. Specifies that the Secretary is to allocate the loan accounts of 100,000 borrowers to each eligible non-profit servicer. The section also permits the Secretary to reallocate, increase, reduce or terminate an eligible non-profit servicer’s allocation based on the performance of such servicer. In addition, this section appropriates mandatory funds to the Secretary to be obligated for administrative costs of servicing contracts with eligible non-profit servicers. This section also requires the Secretary to provide technical assistance to institutions of higher education participating or seeking to participate in the Direct Lending program. This section appropriates $50 million for fiscal year 2010 to pay for this technical assistance. Additionally, this section authorizes the Secretary to provide payments to loan servicers for retaining jobs at location in the United States where such servicers were operating on January 1, 2010. This section appropriates $25,000,000 for each of fiscal years 2010 and 2011 for such purpose. Section 2213. Agreements with State-Owned Banks. This section amends Part D of Title IV to direct the Secretary to enter into an agreement with an eligible lender for the purpose of providing Federal loan insurance on student loans made by state-owned banks. Section 2214. Income-Based Repayment. The section amends the Income-Based Repayment program to cap student loan payments for new borrowers after July 1, 2014 to 10% of adjusted income, from 15% percent, and to forgive remaining balances after 20 years of repayment, from 25 years. Disclaimer: My undergrad students loans were through the Federal Family Education Loan Program and I wish they had been Direct Loans. Edited March 26, 2010 by Startraveler Link to comment Share on other sites More sharing options...
Startraveler Posted March 26, 2010 Author #2 Share Posted March 26, 2010 News from yesterday, as one might expect, that there's big support for the student loan change: A CNN/Opinion Research Corporation survey released Wednesday indicates that 64 percent of respondents favor the proposal and 34 percent opposed it. That includes a majority of every political persuasion: Democrats, Republicans, and Independents. Link to comment Share on other sites More sharing options...
Startraveler Posted March 27, 2010 Author #3 Share Posted March 27, 2010 This was the subject of the President's weekly address today: Here's the center chunk: And it ended with Congress casting a final vote on another piece of legislation that accomplished what we’ve been talking about for decades – legislation that will reform our student loan system and help us educate all Americans to compete and win in the 21st century.Year after year, we’ve seen billions of taxpayer dollars handed out as subsidies to the bankers and middlemen who handle federal student loans, when that money should have gone to advancing the dreams of our students and working families. And yet attempts to fix this problem and reform this program were thwarted by special interests that fought tooth and nail to preserve their exclusive giveaway. But this time, we said, would be different. We said we’d stand up to the special interests, and stand up for the interests of students and families. That’s what happened this week. And I commend all the Senators and Representatives who did the right thing. This reform of the federal student loan programs will save taxpayers $68 billion over the next decade. And with this legislation, we’re putting that money to use achieving a goal I set for America: by the end of this decade, we will once again have the highest proportion of college graduates in the world. To make college more affordable for millions of middle-class Americans for whom the cost of higher education has become an unbearable burden, we’re expanding federal Pell Grants for students: increasing them to keep pace with inflation in the coming years and putting the program on a stronger financial footing. In total, we’re doubling funding for the federal Pell Grant program to help the students who depend on it. To make sure our students don’t go broke just because they chose to go to college, we’re making it easier for graduates to afford their student loan payments. Today, about 2 in 3 graduates take out loans to pay for college. The average student ends up with more than $23,000 in debt. So when this change takes effect in 2014, we’ll cap a graduate’s annual student loan repayments at 10 percent of his or her income. To help an additional 5 million Americans earn degrees and certificates over the next decade, we’re revitalizing programming at our community colleges – the career pathways for millions of dislocated workers and working families across this country. These schools are centers of learning; where students young and old can get the skills and technical training they need for the jobs of today and tomorrow. They’re centers of opportunity; where we can forge partnerships between students and businesses so that every community can gain the workforce it needs. And they are vital to our economic future. And to ensure that all our students have every chance to live up to their full potential, this legislation also increases support for our Minority Serving Institutions, including our Historically Black Colleges and Universities, to keep them as strong as ever in this new century. Link to comment Share on other sites More sharing options...
acidhead Posted March 27, 2010 #4 Share Posted March 27, 2010 Disclaimer: My undergrad students loans were through the Federal Family Education Loan Program and I wish they had been Direct Loans. Could you please provide the reasons why you wished they were direct bank loans and the disadvantages of the FFELP? Link to comment Share on other sites More sharing options...
Startraveler Posted March 27, 2010 Author #5 Share Posted March 27, 2010 On a personal level, I find FFELP to be exceedingly annoying. The lenders I borrowed from in college are not the lenders I pay every month now. My loans were were sold and resold, one was chopped into two pieces and sold to 2 new institutions so that when my grace period ended after graduation and it came time to start repaying I had a great deal of difficulty in even determining who I was supposed to be paying. I now have to cut five separate checks a month (well, not really--I pay online but you get the idea). Direct loans entail one payment to one institution (right here). For all I know, one or more of my loans (or part of one) could be sold again tomorrow, leading to more confusion. The government (the Department of Education) services Direct Loans directly so you don't have to worry about them selling off your loan (or parts of it) to private institutions. So I wish I had those. And from a larger point of view, Direct Loans don't entail the government subsidizing private banks to make loans (of government money), which those banks then profit off of while the government bears the risk. Under FFELP, we pay a middle man to make money by lending our money to students. It's wasteful and frankly it's a form of corporate welfare. Now, under this new law, the government will give the money directly to students, not to banks who take a cut and then lend it out (again, with the government bearing the risk). Link to comment Share on other sites More sharing options...
+DieChecker Posted March 28, 2010 #6 Share Posted March 28, 2010 I agree some of the Student Loan program was screwed up, but is there really going to be less corruption and less problems by doing a government takeover. All these loans will be direct from the government. Waste will decrease, but I would be very surprised if the program becomes More efficient and has less problems. Link to comment Share on other sites More sharing options...
Startraveler Posted March 28, 2010 Author #7 Share Posted March 28, 2010 That argument would carry a little more weight if a successful Federal Direct Student Loan Program didn't already exist (for almost 20 years now). Link to comment Share on other sites More sharing options...
Perdition Posted March 29, 2010 #8 Share Posted March 29, 2010 I don't know much about the student loan thing cause i've never pulled a loan before. What i know is my parents said the interest rates for the parent plus loan was higher than their credit card interest rates and thats why they didn't pull out a student loan for me. For the subsidized loan it was only enough to cover one semester. I'm really hoping that this bill would make college more affordable so I don't graduate with tons of debt and unable to find a job... Link to comment Share on other sites More sharing options...
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