No more feeding off of desperate students. That's what the House said today in passing H.R.3221, the Student Aid and Fiscal Responsibility Act of 2009. In a huge screw you predatory lenders, from now on the government will be the sole provider of guaranteed student loans.
This is great news for students and should increase access to higher education, hopefully for older students as well.
Such House action is especially welcome since student debt increased 25% in just one year.
The Wall Street Journal:
Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.
The Federal Family Education Loan Program, wherein the government guarantees loans made by private lenders, remains the single largest source of college loans. Lenders made related loans for students at 4,465 schools for the 2008-09 academic years. Loan volume totalled $74 billion, up 13% from a year earlier.
For companies like SLM Corp., better known as Sallie Mae, the proposed changes are already having an impact. This week, Fitch Ratings downgraded Sallie Mae to triple-B-plus status and called its outlook negative.
Sallie Mae's shares were recently trading down more than 2% at $9.
The bill is projected to save $80 Billion in stopping subsidies to private lenders and funnel $40 billion to Pell grants.
Wow. To read the actual bill text click here. It's quite an overhaul, and amazingly under the radar.
It's long but here are some things already known:
- $10 billion to community colleges
- $8 billion to early learning programs
- $4 billion to public schools for infrastructure, equipment
- $3 billion to increase access plus complete the degree
- $2 billion to minority focused educational institutions
It was just reported that higher education has a bad track record as well as possible interest in not graduating many of the entering students. While the focus will be on scores, no doubt, frankly if one is working full time while trying to go to school, it is no wonder the flunk out & drop out rate is high.
Rep. George Miller also introduced a bill (H.R. 1461), to cover teaching and research assistants as university employees instead of students, which causes them to be underpaid and overworked.
Oh yeah, the bill also cuts off Acorn from federal funds.