Fed mulls changes to student loan policies

A bill to reform the student loan process currently awaits attention in the Senate.

The Student Aid and Fiscal Responsibility Act, passed by the House in September, would ban private companies from issuing student loans. Instead, the Department of Education would administer loans directly.

"We have a student loan system where we're giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans," President Barack Obama said when he spoke at the White House in April.

The reformed system would require students who have already borrowed through a lender to fill out new promissory notes, explained David Williamson, the director of financial aid at Southern Miss.

Williamson said the financial department is prepared for either outcome of the bill, but he said Congress needs to make a decision soon so the department knows how to advise students through the loaning process.

The Congressional Budget Office originally estimated that this change would save $87 billion over ten years by eliminating subsidies to banks. A recent revised estimate now projects $67 billion would be redirected to increase the fund for Pell Grant scholarships and to serve community colleges.

But the student loan industry estimates this change would mean the loss of nearly 35,000 jobs in the private sector, according to an article from The Hill. Additionally, the Wall Street

Journal reports that the bill includes $77 billion in new spending.

Williamson said he is partially for and partially against Obama's plan.

"I don't like the idea of students not having a choice, but if it saves taxpayers money in the long run, that would be good," he said.

Obama's goal is to increase college access and ultimately lead the world with the highest number of college graduates by 2020.

But USM junior Tori Fletcher said student loans are already too easy to obtain.

"It's just so easy to click, ‘Yes, I agree,' or ‘Yes, I read it,'" she said. "But people don't read it, and they don't know they have to start paying in a reasonable amount of time. People don't understand the consequences of a loan. It's too easy to sign on the line and get that extra money."

"I like the idea of cutting out the ‘middle-man' banks and not having to pay them subsidies," said USM graduate student Andrew Brennan. "However, I think that the private sector is much more efficient with financial matters than the government, and these subsidies may be a safer bet than to risk letting the government handle my loans and adding wasted money to the national debt."