On the floor of the U.S. House of Representatives today, legislators will consider a bill that, if passed, would completely revamp the American financial aid system.

Carved out in Rep. George Miller’s Committee on Education and Labor, the Student Aid and Fiscal Responsibility Act (H.R. 3221) would invest $40 billion to increase Pell Grant scholarships, strengthen low-interest Perkins Loans for students most in need and bolster college access and completion rates with a $3 million funding injection, among other things.

The legislation would overhaul the lending industry by routing all new federal student loans through the government’s Direct Loan program, effectively ending the practice of subsidizing lenders with taxpayer money. It would, for all intents and purposes, remove the lending industry as a middleman between the federal government doling out financial aid and the students who are receiving it.

If passed, the shift in lending would take effect on July 1, 2010.

In a conference call with reporters yesterday, Miller (D-Calif.) and Secretary of Education Arne Duncan lauded the plan, which a press release distributed in advance of the call termed “the largest investment in student aid in history.”

“In recent years it’s become very clear that the federally guaranteed student loan program simply wasn’t efficient for taxpayers or operating in the best interest of students and families,” Miller said.

“Lenders and banks had a great deal,” Miller continued. “They received taxpayer subsidies for doing business that has become highly profitable to them, but the subsidies continue.”

An analysis of the legislation by the non-partisan Congressional Budget Office found that by ending the guaranteed loans, the new program would save taxpayers about $87 billion in mandatory fees owed to lenders over the next 10 years, while only adding $7 billion in discretionary spending — mostly administrative costs — for the federal government.

Hence, the CBO estimates that the net impact on federal spending of the proposed changes would be a reduction of about $80 billion over the next decade.

With that surplus, Congressional leaders have big plans for revamping the nation’s higher education landscape with more financial aid being available to students of both public and private institutions.

Most notable among the new spending would be a $40 billion investment in the Pell Grant scholarship program. With that money, the maximum annual Pell Grant scholarship would increase from $5,550 in 2010 to $6,900 by 2019. Additionally, starting in 2011, the amount of the award would be likely to outpace rises in the Consumer Price Index by 1 percent.

On the conference call, Duncan stressed the long-term impact these Pell Grant investments could have on the aspirations of young people around the country.

“To me that’s so important not just for our current college students, not just for our juniors and seniors who are about to go to college,” Duncan said of the additional Pell Grant investments, “but really for our fifth and sixth graders who are smart, who are working hard but because mom and dad might have lost a job or because they’ve taken a huge pay cut that dream of college too often starts to die at a very early age.”

For the 2007-2008 academic year, 3,349 University students received more than $9 million in aid from Pell Grants, Margaret Rodriguez, senior associate director of the Office of Financial Aid told the Daily in February. That means that each student receiving a Pell Grant got an average of $2,776.

Another aspect of the legislation, that Duncan termed a brand-new program that he’s “never seen anything like … before,” is $3 billion to strengthen college access opportunities and programs to help students complete their degrees.

“The goal here is to dramatically increase attainment,” Duncan said. “The president has drawn a line in the sand. He said by 2020 we have to again be the country that leads the world in the percent of college graduates.”

According to the Organization for Economic Cooperation and Development’s Education at a Glance 2008 report, the United States ranks behind nine other industrialized countries in the percentage of the population aged 25 to 34 that has attained a post-secondary education.

“We’re convinced that we have to educate our way to a better economy,” Duncan said, “and that college access and completion fund will reward those states and those schools that are dramatically increasing not just access but attainment.”

According to Duncan, the legislation will also funnel an additional $6 billion to the Perkins Loan program — a campus-based program that provides low-cost federal loans to students, according to the committee’s website.

Additionally, the legislation will simplify the well-known FAFSA form, which dictates how much a family is expected to contribute financially to their child’s costs for college.

The most ardent opponent of the legislation is, not surprisingly, the lending industry itself.

In a Chronicle of Higher Education article from last week, Martha Holler, a spokeswoman for Sallie Mae, the largest financer of student loans, downplayed the importance of the CBO’s analysis of the proposed legislation.

“This CBO score confirms that mandatory savings of $87 billion are achievable,” Holler said, referencing that such gains could be attained by both the House bill or through a proposed bill that the industry has been pushing.

The lending industry’s Student Loan Community Proposal, which was drafted as an alternative to the House Democrats’ legislation, would result in net federal savings of $67 billion in the next decade, compared to $80 billion in the Democrats version.

Despite their objections to the House proposal, Holler said lenders would “continue to work with the (Obama) administration and Congress to create the best program for students, families, schools and taxpayers.”

Rep. Miller said that the House would start taking up the bill today and complete the amendment process tomorrow afternoon.

The legislation would then go to Senate, where Miller said there is “a lot of anticipation” about the bill.

“Some people say it’s going to be more difficult in the Senate,” Miller said. “But I think we’re relying on students and others to persuade the Senate that this is the right thing to do.”

He added: “And I think we’re going to be successful.”

Ultimately, Miller said he expects the legislation to be on “the president’s desk before the holidays.”

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