Student aid reform could increase federal grants

If Democrats succeed in passing student-aid reform in the next two weeks, UNC students could receive larger Pell Grants to fund their education.

The student-aid bill would eliminate private lenders’ role in distributing federally backed student loans.

Students with federal loans would borrow directly through the U.S. Department of Education. Private lenders could still offer non-government loans.

The legislation is expected to save the government $67 billion in 10 years, said U.S. Rep. Tim Bishop, D-N.Y., in a conference call earlier this week.

This figure is less than the $87 billion originally projected.

Democrats are packaging together the health care and federal financial aid system reforms in Congress in order to bolster both bills’ chances of passage through a process called reconciliation.

After the reconciliation process, the bills can pass with a simple majority vote in the Senate.

The bills packaged together will be revenue-neutral, which means that they would not increase the federal deficit.

The remaining money is expected to bolster Pell Grants, which provide need-based aid to low-income students, and other initiatives.

The House passed a version of the student loan bill earlier this year, but it will have to consider a new version in light of the new estimates and the reconciliation process.

“This measure is about directing precious resources directly to students and families,” said U.S. Rep. Joe Courtney, D-Conn., during a conference call.

Shirley Ort, associate provost and director of Scholarships and Student Aid at UNC, said 14.5 percent of UNC undergraduates hold Pell Grants and stand to benefit from this change.

Student aid groups said they expect that the extent of Pell Grant increases and the expansion of other initiatives will be lower in the revised bill than in the earlier version.

Haley Chitty, director of communications for the National Association of Student Financial Aid Administrators, said the previous bill would have increased Pell Grant amounts by inflation plus one percent annually.

He said he expects that the new bill will increase the grants only by inflation each year.

Chitty said that other initiatives in the original bill could be dropped.

“Until we actually see the legislation, it is all speculation,” Chitty said.

Steve Brooks, executive director of the N.C. State Education Assistance Authority, said the new bill could have negative implications for students.

The assistance authority that Brooks directs partners with College Foundation of North Carolina, Inc., which provides UNC students’ loans.

Brooks said the bill could lead to unemployment and could force students who already have private loans to use multiple lenders, among other drawbacks.

“In the long run, prices will be higher, and services will be lower,” Brooks said. “There won’t be any competition.”

But Chitty said he believes the bill will help many students, especially through its increases to Pell Grants.

“Given the budget restrictions that Congress is facing, we’re still pleased that they’re giving student aid a top priority,” Chitty said.

“The Pell program is hugely underfunded. Unless this bill passes, it seems unlikely that lawmakers will find funds to pay for the shortfall.”

Ort said that if the system is changed, it could cause extra work for financial aid administrators at UNC, but the school will work to ensure that it does not negatively impact students.

“We will have to prepare for either,” she said.

 

 Contact the State & National Editor at stntdesk@unc.edu.