Mississippi State students who receive monetary aid from the federal government could find themselves with a little more cash next school year, albeit without competition from private lenders.
The U.S. House of Representatives recently passed the Student Aid and Fiscal Responsibility Act of 2009, enabling Pell Grant recipients to receive an additional $200 for the 2010 school year. The bill, now on its way to the Senate, would increase the grants annually for the next 10 years and top off at $6,900 by 2019.
The possibility for more money has many students hoping the bill is signed into law.
Junior fashion merchandising major Jameeka Bland said any additional funds to her Pell Grant would benefit her greatly.
“I always have bills, books and rent to pay so any extra money to my Pell Grant would be a relief,” Bland said. “It would help me focus more on my studies and less about how I am going to try to make ends meet.”
While SAFRA could be good news to the 30 percent of MSU undergraduates who receive Pell Grants, it also disables the Stafford and Parent Plus loan programs. Such initiatives allow for students to receive aid from banks or private companies, and the government would insure and subsidize such transactions.
If signed into law by President Barack Obama, SAFRA will disperse funds directly from the government to the student, eliminating the need for private involvement with federal aid.
MSU director of financial aid Bruce Crain said it is important to note SAFRA will not make private lenders obsolete.
“This bill will still allow for students to receive aid from private lenders if they need to,” Crain said. “But if it passes, you will see the death of private lender loans that the government backs.”
Currently, two federal loan programs are used throughout U.S. colleges: the Federal Family Education Loan program which MSU uses and the William D. Ford Federal Direct Loan Program. The FFEL allows for students to accept federal loans from private lenders with varying interest rates.
Mississippi Representative Gregg Harper voted against SAFRA, which passed mostly along party lines. Harper said while it could provide more money to students, the act would cause more harm than good.
“The Federal Family Education Loan program has provided a public-private partnership that has produced billions of dollars in private capital to help young men and women pay for higher education in Mississippi,” Harper said. “A switch to this government-run program slashes the level-playing field between private and public lending and is bad for students, bad for schools and bad for jobs.”
If SAFRA passes, all colleges will use the direct loan program starting July 1, 2010, and receive federal aid solely from the government.
Crain said if signed into law, MSU financial aid will have little problems with changing programs.
“If they pass this within the next few months, we will have the entire spring to change our system and should have no major issues when students come to get their aid in the fall,” he said.
Although students may not take issue with the financial aid office, Crain said government control over federal aid could agitate those who are used to high customer satisfaction with private lenders.
“Private lenders normally fall over themselves with trying to help students because they want to make sure you pick them for your loan,” he said. “It has yet to be seen if the government can be able to help every person who receives federal aid or even have the man power to deal with such a high volume.”
In addition to the critique that government cannot handle all federal student loans, Harper said he sees no need to fix something that is currently working well.
“Nearly three-quarters of all colleges and universities still choose to remain in the FFEL program despite attempts to phase out the program,” he said. “This is proof that the FFEL program works and that Congress should think twice about dissolving it.”
One component of SAFRA those on both sides of the aisle can agree upon is the possible simplification of the FAFSA form.
Crain said the notion would be praised by those who apply yearly.
“Right now, the bill would do away with the income section completely and correlate it directly with your IRS filings,” Crain said. “Last year, they spoke about simplifying the form and ended up adding six questions to it, so we’ll see if it actually happens.”