The Obama administration has planned significant changes to the federal system of college grants and loans, a move it says could result in greater college affordability for students across the country.
The administration plans to dramatically increase funding for Pell Grants and more direct student aid and to do away with bank-based loans.
Obama’s proposed budget plan increases the maximum amount of Pell Grants in 2010 by more than $200, to $5,500. After that, the grants would increase with inflation. Pell Grants would also become an entitlement program, like Social Security or Medicare, meaning that every student who qualifies for a need-based grant receives one.
The new budget proposal would also emphasize federal loans over private loans. The federal Perkins Loan Program could potentially increase from a $1 billion program to a $6 billion program.
At a conference on student debt in the Jack Morton Auditorium last Wednesday, several experts commented on what the proposed changes would mean for students.
“These changes would mean a guaranteed stream of funding that would adjust with inflation,” said Kat Barr, the political outreach director for Rock the Vote. “[Pell Grants] would no longer be subject to the whims of Congress or the economy.”
Barr added that Pell Grants aid about five million students each year.
“Ideally, this proposal will help Pell become a stronger program, with the potential to help more students,” she said.
Barr said by strengthening the Perkins program, the government could give more money directly to students instead of through banks and student loan companies like Sallie Mae. She added the program would be able to provide financial aid to 2.7 million more students.
In his speech to Congress Feb. 27, Obama called for eliminating the bank-based Federal Family Education Loan Program. He said that getting rid of the program would save the government about $4 billion, according to The Chronicle of Higher Education.
Michael Dannenberg, the founding director of the education policy program at The New America Foundation, said at the forum Wednesday that the changes would grant greater stability to student loan programs.
“Obama will not only increase grant aid, but [the money] will be 100 percent secure and guaranteed,” he said, adding that interest rates for federal loans would stay the same.
Dannenberg argued that the federal system would provide better service to students in need of financial aid, adding that in light of the poor economy, some banks planned not to give loans to students attending “certain classes of colleges.” Chase Bank, he said, was hesitant to make loans to students going to community colleges.
Private student loan debt, according to Dannenberg, is one of the most pervasive forms of debt and often overwhelms students when they graduate.
“[It] is almost never forgiven,” he said. “It will haunt you for the rest of your life.”
Both Dannenberg and Barr were hopeful about the administration’s proposals.
“After a very long time of prioritizing banks and colleges, the new system will now prioritize students,” Barr said. “It is a strong start.”