The U.S. Senate’s debate of the budget reconciliation package, which includes an overhaul of the student financial aid system, could begin this afternoon.
The reconciliation bill is best known for the health insurance overhaul it includes. The student financial aid changes included in the bill are credited with helping the health insurance changes pass, because the financial aid changes had much more congressional support.
The legislation passed by the U.S. House of Representatives on Sunday night will increase Pell Grants while mandating that federal loans be borrowed directly from the federal government, rather than private companies.
Key aspects of the financial aid overhaul:
Increases the maximum Pell Grant from $5,350 in 2009 to $5,500 in 2010, with an annual increase by the percentage of inflation. This adjustment will be based on the Consumer Price Index.
Eliminates the role of private loan companies in distributing federal loans. Students will borrow their federal loans directly from the U.S. Department of Education. Private loan companies will still be allowed to offer private student loans.
The government can award grants to states to help them create new community colleges to expand college access.
Lowers monthly payments on federal loans and speeds up debt forgiveness. In 2014, new borrowers would be able to limit their monthly payments at 10 percent of discretionary income. The limit is currently 15 percent. Also, borrowers who make monthly payments will have the rest of their loan forgiven after 20 years, instead of the current 25.
Reaction to the legislation:
Shirley Ort, associate provost and director of scholarships and student aid at UNC, said the Pell Grant increase will benefit 14.5 percent of undergraduates, or about 2,550 students at UNC. How much each Pell Grant is increased is based on the student’s financial need.
“This will be a big help to students with Pell Grants,” said Haley Chitty, director of communications for the National Association of Student Financial Aid Administrators.
“I wouldn’t be able to pay for college without it,” said sophomore biology major Rowan McCarthy, who receives a Pell Grant.
“In the long term, prices (of loans) will be higher and service will be lower,” said Steve Brooks, executive director of the N.C. State Education Assistance Authority, which provides most of the loans offered through the College Foundation of North Carolina Inc.
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