Last September, the House of Representatives passed the Student Aid and Fiscal Responsibility Act of 2009, which increased the maximum amount of Pell Grant awards and converts all federal student loans to a direct loan program. The Senate ought to pass this important piece of legislation, as it would make college more affordable for low-income students and promote increased stability in the student lending process.

The SAFRA is important to the over 800 students at Georgetown who receive Pell Grants – especially the few hundred who receive the maximum amount. Under the bill, Pell Grants would increase from $5,350 to $5,500 between fiscal year 2010 and fiscal year 2011. More importantly, the bill would make Pell Grant funding increases automatic rather than leaving Congress responsible for deciding funding levels annually, as is currently the case. In the future, the maximum Pell Grant level would increase by the Consumer Price Index plus one percent.

The change in Pell Grant funding is important because it ensures that real values of Pell Grant funding for low-income students will not be altered in coming years, especially after a student has already enrolled in a college or university. Some may argue that instituting a policy which would automatically increase the maximum Pell Grant award is harmful because it could become a drain on the budget. However, we feel the cost is a reasonable price to pay to ensure that all Americans, regardless of socioeconomic status, have access to an affordable college education.

It is also important to consider the savings that would result from a switch by the federal government to direct loans. This process would eliminate the middleman from the current federal student loan process. Students who currently have to go to a private loan agency to receive their subsidized student loan would be able to get one directly from the government. Not only would that process be logistically easier, but it would also ensure that loans will be available in all economic climates. Under the current system, there is a danger that private loans could become scarce in tough economic climates when credit is tight. If SAFRA passes, students would have little cause to worry, as they wouldn’t have to find a private company from which to secure a loan.

This measure is also beneficial because the federal government would not have to pay private companies a subsidy to motivate them to offer low-interest loans. Currently, the federal government backs student loans. The private companies that directly lend the money to students do not carry the risk of those loans. SAFRA, in contrast, would allow colleges and universities would directly loan to student. Thus, the government would still be liable for loans on which students default, but they will no longer have to shell out high subsidies to private loan companies. The Congressional Budget Office estimates that this measure will save the government roughly $94 billion over the next decade. Those savings, in turn, would become the funds used to increase the maximum level of Pell Grants.

Simply put, SAFRA would represent a legislative victory for students. The measure would move money out of the pockets of private loan companies and into the hands of those who need it.

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