Students can look forward to increased college affordability -- at no new cost to taxpayers -- if a government proposal to increase federal student aid passes.
The Student Aid and Fiscal Responsibility Act of 2009, which faces a House vote next week, proposes to run all new federal student loans through the Direct Loan Program starting in 2010. This program allows students to borrow directly from the federal government without going through third-party lenders, such as banks, whose federal student-aid programs are subsidized by taxpayer money.
Proponents say the plan would save an estimated $87 billion over the next 10 years, which will then be invested in increasing federal student aid. Penn State has participated in the Direct Loan Program since 2008.
"This legislation will allow us to look every child in the eye and say, 'You're going to college,' " said U.S. Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, in a press conference call with college reporters. "It is the right thing to do financially, it is the right thing to do economically and it is the right thing to educationally."
With the savings generated through the implementation of the Direct Loan Program, the bill aims to increase Pell Grant scholarship amounts, lower interest rates on need-based federal student loans, provide more access to the Perkins loan program and invest in support programs bolstering college access and completion. In addition, the bill will make it easier for families to apply for financial aid by simplifying the Free Application for Federal Student Aid (FAFSA) form.
"I think this is a good idea, just because I know that it's a pain ... to fill the FAFSA out," said Peter Simon (junior-mechanical engineering), who is currently under a student loan. "It shouldn't be that hard to get help to go to school."
Furthermore, the Direct Loan Program would also insulate students from any market swings that might affect interest rates by keeping loan interest rates at 6.8 percent, Miller said.
Donald Heller, an associate professor of education policy studies and an expert on higher education economics, said the bill will help students in the financial aid process.
"This bill will take away the confusion students usually feel when applying for financial aid by narrowing down the choice to just the Direct Loan Program," he said.
