For Penn students feeling the burden of their educational costs, the government has decided to help — the House of Representatives voted 253 to 171 earlier this month to pass the Student Aid and Fiscal Responsibility Act.
If the bill passes in the Senate, it will eliminate subsidized Stafford loans for graduate and professional students after July 1, 2015, and the government will begin directly lending to students instead of subsidizing and guaranteeing loans through private lenders.
The provisions in the bill for revising Stafford Loans and the Federal Perkins Loan Program are the most likely to affect the University, according to Director of Student Financial Aid Bill Schilling.
Each year, between 7,500 and 8,000 Penn undergraduate and graduate students receive Stafford Loans through the Federal Family Education Loan Program. The new bill would end the FFEL program on June 30, 2010.
The modifications to FFEL would affect the University more than the students receiving the loans. For the student, the only change is the requirement to sign a new promissory note to receive aid through the government.
Schilling said the University will be ready for any government decision concerning lending.
“Because of the flux that has been in the student loan environment in the last couple of years, we decided a year ago that we needed to be prepared for anything,” he said. “We have been for the past year working to make [sure] our systems are compatible with either FFEL or direct-lending.”
Schilling added that the University will be in a better position to make the transition than other schools that have not begun evaluating their own financial-aid programs.
Changes to the Perkins Loan, however, will have more profound effects on the available funds for student loans.
With no new appropriations from Congress, Penn’s funding for Perkins Loans has been declining.
Five years ago, the University was able to allocate approximately $20 million in Perkins Loans. This year, Schilling expects it to be between $7 and $8 million.
He said the bill benefits students by creating a program that does not rely on the repayment of old loans to create new loans.
Other important provisions in the bill include simplification of the FAFSA forms, funds to community colleges and historically black colleges and universities, and increases in Pell Grants each year as the cost of living rises.
Dean of Admissions Eric Furda said the act will most likely not affect this year’s applicant pool, but may help future prospective students pay for Penn.
“Because of this bill, there may be a larger push for access and more national attention to helping families make college affordable — that’s the direction we need to head in this country,” he said.
Congressman Chaka Fattah (D-Pa.), whose district includes Penn, also strongly supported the bill.
Fattah called the legislation “long overdue” and “commonsense reform” in a statement.
“This is a major win-win for higher education and America’s students,” he wrote.
