While selecting majors, dorms and roommates fluster matriculating college freshmen, their parents are focusing on a more problematic aspect of higher education ? the cost. Buried within the mess of the Health Care and Education Reconciliation Act, the Student Aid and Fiscal Responsibility Act was recently passed, making a college education more available and affordable for all.
Previously, private lenders would issue federally backed loans to the public. If a student defaulted on the loan, the bank would still get paid by the federal government. This system was laden with ?red tape? and the government spent an unnecessary amount of money in subsidiaries to private lenders.
Critics of the new Act, such as Minnesota Rep. John Kline (R), describe it as a ?government takeover.? The bill, however, does not change the government?s role in providing loans. These loans were always backed by the government, but were issued by private lenders. Under the Act, families will deal directly with the government, reducing unnecessary expenses. The Act is estimated to save $68 billion over the next decade, which will be used to support underprivileged students instead of private banks.
A significant advantage of the bill is that it will directly benefit recipients of the Pell Grant, which has failed to adjust to the rising cost of a college education. The Student Aid and Fiscal Responsibility Act will increase the maximum annual Pell Grant scholarship from $5,500 in 2010 to $5,975 in 2017, and will make cost of living adjustments.
Additional savings will be used to support historically black colleges and community colleges, ensuring a quality of education for all, regardless of a family?s financial situation.
The Act also reforms repayment policies, capping interest payments at 10 percent of a recipient?s salary, as compared to the current 20 percent. Debts will be forgiven if a recipient chooses to enter teaching, nursing or the armed forces. This promotes participation in public services, providing for society as a whole.
The Student Aid and Fiscal Responsibility Act will save significant amounts of money that can guarantee every student the opportunity to worry about majors and roommates, instead of the cost of college.