House Ousts Private Lenders From Student Loan Business
The House of Representatives on Thursday voted 253-171 for the Student Aid and Fiscal Responsibility Act, for the biggest overhaul of the student aid program to take place in 35 years.
Passed largely along party lines, the bill ousts Sallie Mae, the biggest student lender, and private lenders from the college student loan business, gives the federal government control of the process, and uses the savings from eliminating the middle man to increase Pell Grants. Colleges have until July 1, 2010, to switch to the federal direct lending program. According to the Congressional Budget Office, this will save taxpayers an estimated $87 billion, $40 billion of which is to be spent on Pell Grants.
Rep. Donald Payne (D-New Jersey), who sits on the House education committee, said that in addition to increasing the maximum amount of a Pell Grant to $6,900 over the next decade, the bill reduces loan interest rates and bill simplifies the application process.
“This will reach tens of thousands of students over the life of the bill and will open up doors for many more black students who previously found it difficult or impossible to get a higher education,†said Payne.
Minnesota Rep. John Kline, the ranking Republican on the House Education and Labor Committee, released a statement saying that the vote “vote was about expanding the size and scope of the federal government through tens of billions of dollars in new entitlement spending and the elimination of choice, competition, and the innovation of the private sector. This job killing legislation is rife with hidden costs that will be passed on to future generations.â€
According to a Senate Democratic aide, a companion bill is currently making its way through committee.