OPINION | Federal financial aid legislation fails to solve the runaway cost of college


On March 21, the Student Aid and Fiscal Responsibility Act of 2010 passed as a part of the health care reconciliation bill.

Under this legislation, the federal government has made college affordable, insured the increased success of community colleges and put American education back into the hands of the students … April Fools!

Despite the bill’s inability to solve all higher education problems, you folks should listen up, ’cause this affects you.

The Student Aid Fiscal and Responsibility Act, includes some great measures, including decreasing the amount a borrower must pay in student loans per month to 10 percent of their discretionary income. SAFRA allows loans to be forgiven for responsible borrowers after 20 years of repayment in place of the current 25-year policy.

At first, the legislation appears sweeping. In an unprecedented move, SAFRA eliminated the Federal Family Education Loan program and will put all federal student loans under the Federal Direct Loan Program by July 1.

This action drew a lot of heat from the private sector about loss of jobs and government takeover while others see it as an important step to President Barack Obama’s goal of having the highest proportion of college graduates in the world by 2020.

Before SAFRA, federal student loans were distributed through two programs. Both programs administered similar loans at similar interest rates with similar repayment options.

One program, which SAFRA preserves, is the Federal Direct Loan Program, in which students loans are administered through the Department of Education and its contractors and funded through the U.S. Treasury.

The second program was the Federal Family Education Loan program, administered by private financial institutions which were subsidized to lend to students.

The University of Minnesota has been serviced by the Federal Direct Loan Program since 1995, and since then the financial aid office has felt good about the switch.

“It’s been a much better system for students, and you get the money faster and they know where the money is,” said Kris Wright, director of financial aid at the University. “They’re not dealing with a lender who is … dealing with private loans, so they’re not necessarily being cross-sold things that they don’t need.”

Why is the switch from the two types of lending to the one Federal Direct Loan Program so crucial to funding higher education? Well, by increasing efficiency and cutting out the proverbial “middleman,” SAFRA is projected to save the government $61 billion.

Obama has allocated $36 billion of this money to increase Pell Grant funding. This money will ensure that Pell Grants increase with the annual rate of inflation and pay for the $19 million shortfall the program currently holds.

“The really big effect is that it puts Pell on a firm financial footing when a lot of the work to be done is balancing the budget and cutting things,” Wright said.

However, since the 1980s, higher education costs have risen annually at 3 percent higher than the “general increase in prices,” according to the Congressional Budget Office.

“As good as things were for Pell, we probably still need to do some more work with it,” Wright said. “Pell used to pay 75-80 percent of the cost of attendance back in the ’70s and ’80s; it now pays less than a quarter.”

Don’t get me wrong – more money for Pell is great. The Pell program is the main government program to support low income students without repayment. But with Pell funds rising at 1 percent inflation and higher education costs at 3 percent inflation, it’s hard not to feel like this bill is only a drop in the bucket.

On top of that, the Congressional Budget Office said the estimated savings in SAFRA are based on the procedure outlined in the Federal Credit Reform Act of 1990 and are about $21 billion too high.

My problem with SAFRA is not that it is detrimental or that it doesn’t save enough money but that when you look at the numbers, it just doesn’t do much for the individual student.

If SAFRA is the federal government’s plan to save higher education, I’m disappointed. But community colleges are the ones who should be throwing the fit. After Obama campaigned endlessly to increase support for community colleges, the final bill only provides them a $2 billion competitive grant program.

According to the American Association of Community Colleges, there are 1,195 community colleges in the United States and 46 percent of U.S. undergraduate students attend these schools. Community colleges, which include technical and vocational schools, represent primary entrance points for low-income, rural and minority students.

These students will benefit from the Pell grant increases, but the schools themselves had been expecting billions more from the government to improve and expand their programs.

SAFRA has found ways to increase some funding to higher education, and that’s great. It was difficult to ask for more money while SAFRA sat next to the health care bill on the reconciliation table. But the government should’ve taken a firmer stand.

Place a tuition cap on public universities, create an agency to explore administrative funding and show students you’re committed to higher education. Don’t forget we’re college-educated, because we know when enough is not enough.

Nora Leinen welcomes comments at nleinen@mndaily.com.