Higher Ed Watch has a great blog post today clearly outlining their hopes for college funding and student loan reform in an Obama administration.
Here’s the short version of their list:
1. Better oversite at the Dept. of Education and better (or heck, any) enforcement when lenders break laws protecting students.
2. Reassess the need for two competing federal student loan programs and clean up the way they are run.
3. Reform the bankruptcy law to provide protection for private student loan borrowers.
4. Crack down on unscrupulous, for-profit trade schools.
5. Simplify and stream-line the federal aid system.
The President & CEO of the National Association of Student Financial Aid Administrators (NASFAA), Dr. Philip R. Day, Jr., has written a terrific letter to Obama, congratulating him on his election, discussing the federal student aid system, and outlining plans for NASFAA to work with the new administration. From the letter:
At specific points during the campaign it seemed you were talking directly to us in the higher education trenches. When you said, “America is the sum of our dreams, and what binds us together, what makes us one American family, is that we stand up and fight for each other’s dreams, that we reaffirm that fundamental belief – I am my brother’s keeper, I am my sister’s keeper – through our politics, our policies, and in our daily lives,” it was clear that you understand the critical importance of supporting college access for all students, and not simply those of greater means. Read more…
As I’m sure you all know by now, Obama has been elected the new president of the United States. So what will an Obama presidency mean for student loan reform? It’s too soon to tell, but a review of some of his past statements might be instructive.
In a May 2007 interview with the Yale Daily News, Obama “vowed to overhaul the aid system in order to curb corruption by eliminating the middleman between the federal government and students seeking loans.” In that interview, Obama argued that the current student loan system benefits private lenders at the expense of students.
Also in May 2007, the Boston Globe reported that Obama said that he would like to see student loans centralized under the federal government and end the practice of federally guarenteed bank loans. “It is long past time to put an end to the rampant abuse by lenders of our student loan programs,” he said.
By June 2008, Obama was making more specific policy proposals. As reported in NextStudent’s Student Law Blog, he supported a $4000 college tuition tax credit in exchange for 100 hours of community service, expected to cost about $10 billion annually.
While in Congress, Obama also sponsored a bill that would have increased the amount of funds available in Pell Grants by 26 percent, from $4050 per year to $5100 per year with additional increases built in for inflation.
Most recently, in an interview that aired on MTV this past Monday, Obama reasserted his $4000 tax credit plan and talked about loan forgiveness for certain professions like teaching and nursing. He did, however, seem to hedge his words a little on people who already owe substantial loans that they are having trouble paying.
It will be interesting to see how many of Obama’s plans he is able to implement and whether, as he eases into the role of President, he will take a more or less aggressive stance on student loans and the cost of education. We have a new President, but only time will tell if we get real change. Here’s to hope.
By the end of the night (hopefully), we’ll know whether our next president is going to be Barack Obama or John McCain. No matter who wins, the next President is going to face several challenges in making sure that college is affordable for everyone. The Higher Ed Watch blog lists the federal budget deficit, the continuing credit crunch, a budget shortfall in the Pell Grant program, and expiring student aid programs and benefits as major obstacles to each candidate’s plans for making college more affordable. One important program set to expire is the interest rate reduction for subsidized federal student loans.
The interest rate reduction that Congress approved for subsidized federal student loans is due to expire at the end of the 2011-12 academic year. In other words, under current law, loans issued that year will have a fixed interest rate of 3.4 percent for the life of the loan, but loans issued the following year will carry a fixed rate of 6.8 percent. The new president will have to decide whether he supports extending the 3.4 percent interest rate. Doing so could cost as much as $3 billion a year. Of course, allowing student loan interest rates to double could be politically risky, no matter the costs or public policy implications. [At Higher Ed Watch, we believe that policymakers should consider expanding the existing student loan interest rate reduction instead. That proposal would be less costly and better targeted on recent college graduates with burdensome levels of debt.]