The Student Aid and Fiscal Responsibility Act (SAFRA) is by far the greatest step ever taken in Washington to combat the control of giant banking moguls over our country’s youth. Consistently, we have seen the cost of higher education climb pricing many young people out of the opportunity for a better future. At the same time assistance available to young people has actually gone down.
Twenty years ago, 60% of young people who were able to pay for college on Pell Grants today that number has dipped to half of that. The bill is the first meaningful step in a long-term solution to the predatory private lenders who take advantage of students.
Among other things, the bill will
- Invest $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2011, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent.
- Strengthen the Perkins Loan program, a campus-based program that provides low-cost federal loans to students, by providing the program with more reliable forms of credit from the federal government and expanding the program to include significantly more college campuses.
- Keep interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012. (This compares to loans that Courtney mentioned whose loans can have a 7.2 percent or even 10 percent interest rate).
- Provide loan forgiveness for members of the military who are called up to duty in the middle of the academic year.
- Convert all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders like Sallie Mae that are subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the current lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.
This was one of the biggest promises the President made to young voters this past election, and it came dangerously close to being thrown under the school bus by elected officials willing to sell out to any bidder. Luckily, youth across the country emailed, called, and tweeted elected officials begging for the change they were promised. The result was a commitment to the original bill that stops these wasteful subsidies and moves the program under the already existing Direct Loan program, and the Student Aid and Fiscal Responsibility Act will be folded in with the health insurance reform bill.
There must be reform, and Washington MUST choose students over the banking industry. Washington subsidized the banking industry with as much as $87 billion over the last 10 years, which has lead to a nationalization of the banking industry that continues to make CEOs richer while young people face a race to the bottom.
The best investment Washington can make in its future is with an investment in the nation’s youth. With young people who are trained and well educated our country can spur a new cycle of innovation capturing the entrepreneurial spirit of a generation. But with tens of thousands of dollars in debt, these students can’t take any risks even if they could begin a new cycle of growth and progress in these dire economic times.
This bill is the first major step in what could be the greatest overhaul in education. There is such possibility ahead, and nested in that is the glimmer of hope we’d nearly lost to the banking lobby.