Legislation is trying to cut out the “middle man” when it comes to students accessing financial aid, said Director of the Office of Financial Aid Billie Jo Hamilton.
The Student Aid and Fiscal Responsibility Act (SAFRA), which awaits U.S. Senate approval, would allow students to receive money directly from the federal government instead of going through banks.
“Instead of the school getting the students’ money from the bank and the bank billing the federal government for the money it took them to lend the money, they’re just going to go around them and we’ll get our money directly from the federal government,” Hamilton said.
Hamilton said a majority of SAFRA changes would affect the availability of Pell Grant funds. Those who meet the eligibility for federal aid are often awarded the grant, she said.
Students with the lowest income who apply for federal aid are given Pell Grants.
They can be used at any university and community college and are funded completely by the federal government, said Congressman George Miller, (D) chairman of the Education and Labor Committee in the House of Representatives.
SAFRA was passed through the House of Representatives on Sept. 17 with a 253-171 vote.
Lenders and banks have a “great deal” in distributing loans and grants to students, and banks are able to charge high interest rates, Miller said.
“(The banks) receive taxpayers’ subsidies for doing business that has become highly profitable to them,” he said.
By switching to a direct lending program, instead of using banks, the bill will allow the government to invest $87 billion in savings for loans and grants, Miller said.
Miller said by eliminating banks in the process, more students would be able to receive loans from the government because it would save money.
Hamilton said USF has decided to reorganize its financial aid structure to use the model that Congress is setting up with the new bill.
The University uses banks to distribute loans to students. USF plans to put a new structure into effect starting in summer 2010, Hamilton said.
The purpose of the bill is to help students and parents pay for college because the current system was “inefficient,” Miller said.
“That will help us make college more affordable, to build a world-class community college system, to improve opportunities to help our youngest students succeed and pay down the deficit,” Miller said. “We’ll all be able to do this with absolutely no cost to the taxpayers.”
SAFRA would also increase the award amount that a student receives from the Pell Grant program. The highest amount in 2009 was $5,350, according to the Education and Labor Committee Web site.
The bill would invest $40 billion nationally to the Pell Grant program and increase the amount to $6,900 by 2019.
“The SAFRA will guarantee students dependable access to federal college aid and make these programs more effective and efficient for families and taxpayers and is fiscally responsible,” Miller said.
Hamilton said the amount of money a student is awarded is based on the family income and students’ income if they are living with their parents. Each Pell Grant can be used for 18 full-time semesters, 36 half-time semesters or 150 percent of the total credit hours that are required to complete the student’s major.
“We call it an entitlement grant because once a student is awarded the Pell Grant, the government is obligated to pay it,” Hamilton said.
Students must reapply for the Pell Grant each year and will lose the grant if they are not continuing to meet the income requirements.
Hamilton said the bill also has plans to simplify the Free Application for Federal Student Aid (FAFSA) form that students are required to fill out to receive federal funding, but the bill also stipulates that a student will not be eligible for any need-based aid if his or her family has assets worth more than $150,000.
“The problem I kind of had with that is that if you are a parent who has saved (money) for your children to go to college, then you’re going to get penalized,” Hamilton said.
Hamilton said she expects the bill to be passed and enacted by November.