Pennsylvania college students have a lot riding on a bill, now pending in the U.S. Senate, that would revamp the financial aid market.
If the Student Aid and Fiscal Responsibility Act is enacted, more Pennsylvanians will be eligible for more money in the form of Pell grants, which are distributed based on financial need, help pay for tuition and other college expenses, and do not have to be paid back.
During the 2008-09 fiscal year, 212,000 Pennsylvanians received grants that totaled $621 million. The legislation would bump those numbers up significantly, adding 74,000 students and $529 million more dollars. That's 35 percent more students and 85 percent more money -- and it won't cost taxpayers or students a penny more.
H.R. 3221 would eliminate the middleman in the college loan industry, so the U.S. Education Department -- not individual private lenders -- would issue federally guaranteed student loans. Right now, banks get a subsidy of about $75 per loan, backed by the government to insulate them from risk. The Congressional Budget Office says eliminating those payments would save $87 billion over 10 years.
The Obama administration would put nearly half of the savings -- $40 billion -- into the grant program. The remainder would be used to give families a $10,000 tax credit for four years of college and increase funding for community colleges and early childhood programs.
Opposition to the measure, which passed the House on a bipartisan vote of 253-171, comes from banks and other lenders and has taken the form of radio advertisements encouraging Pennsylvania's senators, Bob Casey and Arlen Specter, to vote "no." The financial industry's argument is that the switch will cost jobs. But the Education Department won't be servicing -- that is, collecting on -- its $550 billion student loan portfolio. That's where the Pennsylvania Higher Education Assistance Agency already is a winner because it was one of four companies selected to service loans.
Some colleges are worried about the federal government's capacity to handle the direct loan system. The experience of Penn State University should calm their fears, because it managed to switch to direct lending without trouble in 2008.
U.S. Education Secretary Arne Duncan says "this is a staggering, once-in-a-lifetime opportunity" to increase opportunities for Americans when families are under financial duress and afraid they cannot afford to send their children to college or trade schools. It's also good for the country, which needs an educated, skilled work force.
Sens. Casey and Specter should vote "yes."