The Student Aid and Fiscal Responsibility Act was passed by the House of Representatives Thursday, and will soon go before the Senate for approval.
The bill, which would save the federal government an estimated $87 billion over the next ten years, was approved by a bipartisan vote of 253 to 171, according to a press release from U.S. Representative George Miller.
Under the bill, The Direct Loan program would replace the Federal Family Educational Loan Program, F. F. E. L. P., eliminating the role of private banks in federal student lending and requiring students to borrow directly from the federal government.
If passed by the Senate, changes under the bill would take effect July 2010.
"Today the House made a clear choice to stop funneling vital taxpayer dollars through board rooms and start sending them directly to dorm rooms," Miller said. "This vote was a historic triumph for America's students, families and taxpayers - and will ensure that their interests never again take a backseat to lenders and big banks."
Of the savings, $40 billion would go to increase the maximum Pell Grant from $5,350 in 2009 to $5,550 in 2010 and $6,900 in 2019, and $10 billion would go back to the Treasury to reduce the deficit, according to a press release from Texas Representative Chet Edwards.
"With tuition rates skyrocketing, middle class students and their families are struggling to afford college. This is an important step toward rebuilding the American economy," Edwards said, "and making sure young people have access to an affordable college education by expanding Pell Grant benefits, and investing in our community colleges at no cost to taxpayers."
College students would receive a more affordable education through the Direct Loan Program, according to a press release from Miller, because loans provided are not subject to fluctuations in the market-guaranteeing the same low interest rates, terms and conditions, no matter what happens in the economy,
Texas A&M participates in F.F.E.L.P., so students would experience a change next summer if the bill is passed by the Senate.
"The benefit to a student is that the process [for applying for federal aid] is a little more streamline because it's from one source- the federal government," said Texas A&M Scholarships and Financial Aid Provost Joseph Pettibon. "On the other hand, students don't have a choice in who they borrow from so it's a trade off."
Nearly 7,000 Texas A&M students are aided with Pell Grants, Pettibon said.
"This has a significant impact at A&M and throughout the country," he said. "It will essentially increase the number of students receiving the Pell Grant."
Other than how the programs are funded, The Direct Loan program and F. F. E. L. P are nearly identical, Pettibon said. "It takes a step out [of the process]," he said. "You don't have to worry about who has the best offer for you."
Under the Direct Loan program, interest on Federal Parent PLUS Loans would decrease from 8.5% to 7.9%.
Under the bill, Texas A&M students with Subsidized and Unsubsidized Federal Stafford Loans and Federal Parent PLUS Loans would have to sign new promissory notes, which are usually good for 10 years.
"Basically anyone with a loan will have to apply for a new loan," Pettibon said. "Students should start the process around March [2010]. The message to students is the same as it would be any given year- apply for federal aid as soon as possible."
A similar bill will go before the Senate next month so what exactly the change would entail is still uncertain, Pettibon said, but the Texas A&M Financial Aid Office will advise students with what they need to do in a timely manner.
"How much money we get here at A&M for students under the Direct Perkins Loan program is undetermined," he said.
In addition, the bill would create a supplemental program for veterans who attend private colleges, according to a press release from Edwards, and loan forgiveness for members of the military who are called to duty in the middle of the academic year.
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