House passes bill to overhaul student lending

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The U.S. House of Representatives passed a bill Thursday that, if enacted, would be the most dramatic overhaul of student lending practices in history.

The Student Aid and Fiscal Responsibility Act, passed by a vote of 253 to 171, would abolish the current system of subsidizing loan companies and allow the government to lend to students directly.

The bill would save taxpayers an estimated $87 billion, $40 billion of which would go to increase the amount of Pell Grant money offered from a maximum of $5,350 per student to $6,900 in 2019, according to the House Education and Labor Committee.

Currently, the federal government subsidizes most student loans and guarantees them in case of default. The government does not usually loan to students directly, except under the William D. Ford Federal Direct Loan Program, where the U.S. Department of Education is the lender. Most students get loans through a bank, such as Sallie Mae.

Under the proposed legislation, the government would end the Federal Family Education Loan program, which has been around for more than 40 years.

“It takes all loans and puts them through the direct loan program,” said Ed Gilman, communications director for Democratic 2nd District Rep. Michael Michaud. “We see it as a really substantial step forward for students in Maine and throughout our country, especially in regard to Pell Grant provision.”

Rep. John Kline, R-Minn., compared the bill to a “government takeover” of health care.

“We see government seizing control of student lending, forcing the private sector out and welcoming in a mountain of public debt. I’m almost afraid to ask: What part of our lives will be handed over to government next?” Kline said in a press release.

The vote was largely along party lines, with 247 Democrats, including Maine’s two representatives, and six Republicans voting ‘yes.’

Chellie Pingree, Maine’s 1st District representative, attached an amendment to the bill that provides money to community colleges for renovation or repair of existing facilities and certain construction of new facilities. Originally, the bill prohibited funding community colleges, such as Maine’s, that received funds from the American Recovery and Reinvestment Act, according to Willy Ritch, a spokesperson for Pingree.

“Especially in these economic times, there’s a lot of people who want to go back to school, and they want to go to community colleges but they [community colleges] just can’t accommodate them all,” Ritch said. “It provides, in the case of community colleges, money to help them with their physical plants.”

“I think [the bill is] going to make college more accessible to Maine students, so whether that’s a community college, a public university or a private university, it’s going to make it easier for kids to go to college,” Ritch said. “It will help all students because it will increase Pell Grants. It will keep the cost of student loans low.”

The bill originated in the House, so it now goes to the Senate. A final version of the bill must be approved by both chambers before the president can sign it.

This entry was posted on Monday, September 21st, 2009, 1:05 am. You can follow any responses to this article through the RSS feed.