Not much would change for UNC students if Congress passes a bill to change the way federal loans are distributed.
But the switch could cause headaches in UNC’s financial aid office.
The Student Aid and Fiscal Responsibility Act would end the Federal Family Education Loan program, which works with private banks to offer loans to students. All loans instead would be issued through the U.S. Department of Education.
UNC-Chapel Hill works with three different private lenders who offer relatively low interest rates, said Shirley Ort, director of the Office of Scholarships and Student Aid.
About 67 percent of undergraduates at UNC-Chapel Hill received financial aid in 2007-2008. Loans made up about 27 percent of the typical aid package.
Loans handed out directly by the education department would probably be comparable, and the application process for students likely wouldn’t change, she said.
“I don’t think they’ll even know it will have happened,” Ort said.
But Congress’ actions will guide the office’s transition to a new financial aid information system that is part of Connect Carolina, a campuswide overhaul of computing systems.
Because the office doesn’t know how federal loans will be handled, the system must be configured to work with both methods, Ort said.
Some UNC-system schools have already switched to direct lending, including N.C. A&T, N.C. Central University and UNC-Wilmington.
Supporters of the proposed legislation say it would save about $87 billion by cutting out taxpayer subsidies to private banks. The money would be used to increase Pell Grants, which go to low-income students.
The bill passed the U.S. House of Representatives 253-171 on Sept.17 and was referred to a Senate education committee. Staff are revising the bill.
Kimrey Rhinehardt, the UNC system’s vice president for federal relations, said she wants to see the Senate version before forming an opinion on the bill. Rhinehardt is in charge of advocacy for the system.
U.S. Sen. Kay Hagan, D-N.C., has expressed support for the bill, noting provisions that would increase funding to historically black schools.
Sen. Richard Burr, R-N.C., said in a statement last week that he opposes the change, calling it a federal takeover of private businesses.
“It will lead to reduced customer service, more bureaucratic red tape, no choice of lenders … and I will continue my efforts to prevent such a takeover,” Burr said.
Both senators sit on the committee that will review the bill.
Biggest changes
Switches loan programs
The Federal Family Education Loan program subsidizes
lenders, who then offer federally guaranteed loans to students. The bill would end this practice by July 2010. All lending would instead be done through the U.S. Department of Education.
Increases Pell Grants
The Pell Grant program provides grants to low-income students. The loan legislation would
provide about $40 billion to increase the maximum annual grant.
Other funding
The legislation also includes funding to establish retention programs to improve college graduation rates, improve access to two-year community colleges and support historically black colleges and universities.
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