Pedro de la Torre on the Student Aid and Fiscal Responsibility Act

What is the Student Aid and Fiscal Responsibility Act?

The Student Aid and Fiscal Responsibility Act is a proposal to reform the student financial aid system. Essentially, it would take these two programs that exist now, one of which is the federal Family Education Loan Program, in which private banks and other student loan companies are subsidized by the federal government and are able to get loan guarantees against defaults from the federal government to provide loans to students. The second program is the direct loan program, and in this program the government, like it sounds, just gives loans directly to students. The problem is in this first program, these subsidies are very expensive. There's been a lot of other problems with conflicts of interest and corruption. By moving to the second program, the direct loan program, taxpayers are actually able to save tens of billions of dollars. The latest estimate is $67 billion, and that's actually kind of low because schools have already been moving to this second direct loan program. What the student aid and fiscal responsibility act would do is invest all of this money into Pell grants and other education programs, which would be a great benefit for students.

Why do we need reform to the student aid system?

The student aid system right now first of all doesn't provide enough help for students. The maximum Pell grant has dropped from covering about three-fourths of an average college education to covering only about one-third since the grant was created. College costs are rising and student aid has not kept up. But really the most pressing reason why we really need to pass Student Aid and Fiscal Responsibility act is because if it does not pass, any existing shortfall in the Pell grant program that was created when students flooded into colleges during the recession and a lot more people had financial need during the recession, this shortfall if not filled in one way or another will cause half a million students to lose their grants completely and cause everyone else in the program--about eight million students--to get their grants cut by 60 percent. This is really unacceptable. We cannot let that happen. And if Congress does not pass the Student Aid and Fiscal Responsibility Act, they'll either be forced to find this money in couch cushions or cut some other programs to the bone, or they'll have to use deficit spending to make it up. So this is clearly the fiscal responsible way to go.

Why is the bill being rolled into health reform legislation?

The Student Aid and Fiscal Responsibility Act is being included in the reconciliation bill along with health care first of all because it's the right thing to do. Young people are one of the most uninsured groups in America and this bill, if passed, would extend insurance to ten million members of the millennial generation that are currently uninsured. And, of course, the younger people are also struggling with the costs of college, struggling with student debt and we have to do something to solve that problem. The second reason is simply because the rules say that because of some of the rules about reconciliation, that you actually have to include the student aid bill with the health bill. This was the plan all along. When the budget came out for 2010, instructions were given for reconciliation for both health care and for student loans. What I think they need to focus on are the consequences of not passing this, which are a lot more uninsured Americans, a lot more students not being able to pay their college tuition, and a whole lot of students losing their grants in the midst of some really, really awful increases in tuition.