Secretary of Education Arne Duncan in a live web chat yesterday highlighted the importance of passing the Student Aid and Fiscal Responsibility Act (SAFRA), saying it would have a huge impact on college affordability.
"This is a once−in−a−lifetime opportunity to dramatically increase money … putting billions of dollars behind college students who are working hard," he said in his opening remarks.
Yesterday's chat was open to questions from the public and also featured Melody Barnes, assistant to the president and director of the Domestic Policy Council.
SAFRA passed in the House of Representatives last September but has been held up in the Senate. If passed, the act would abolish the current Federal Family Education Loan Program (FFELP), which provides loans to students indirectly by subsidizing private lenders.
Under SAFRA, all federal student loans would instead be disbursed through the Direct Loan system, which cuts out the private lender middleman. The act also includes provisions for using the savings resulting from this switch to increase financial aid to students and institutions in a bid to ensure that college remains an affordable option for American families.
Duncan highlighted the fact that the bill would allow for massive funding increases at no cost to taxpayers. According to the Congressional Budget Office's estimates, ending subsidies to lenders under FFELP would result in savings of over $80 billion over the next 10 years.
"[The bill is a] chance to invest as much as $87 billion into education without going back to taxpayers, simply by stopping subsidies to banks," he said.
Critics of SAFRA, however, have accused it of amounting to a government takeover of the student lending system, which would decrease the options available and prevent free market forces from working effectively. They have also questioned the bill's purported savings and pointed out the possible impact on employment in the banking sector.
One of the key provisions of the bill is a huge investment to increase the maximum Pell Grant award, from $5,350 in 2009 to $5,550 in 2010 and $6,900 in 2019. This, Duncan said, is critical to ensuring that education aid keeps pace with inflation.
"I really worry about nine− or ten−year olds … whose dreams of college start to die young," he said. "Many Americans start thinking that college isn't part of their reality … that has to fundamentally change … if this bill passes we can index Pell Grants … so that families wouldn't be falling behind."
The bill also focuses on ensuring that students are financially able to complete their college education through the College Access and Completion Innovation Fund.
"There's $3.5 billion that we want to put out there on a competitive basis for colleges and universities who want to build a completion culture," Duncan said. "We want to put money behind folks who are interested in doing the right thing … spotlight best practices that can be replicated nationally."
The plan also calls for extending tuition tax credits, increasing funding for community colleges and historically black colleges and universities, simplifying the Free Application for Federal Student Aid and reworking Perkins Loans.
Duncan and Barnes also discussed the Income Based Repayment Plan, which caps loan repayment at 10 percent of income instead of 15 percent. It also forgives debt after 10 years for graduates in public service and after 20 years for everyone else.
Duncan noted the importance of this move in attracting graduates to public service, especially the teaching profession. "Income−based repayment is designed to bring that talent to the sector in the country where we need it the most," he said.
SAFRA would not have a direct impact on Tufts, as the university has already made the switch to direct loans. Tufts also has its own debt−forgiveness program for alumni entering the public sector. Students might indirectly benefit however, through the increased number of funding and aid options.
"This bill would bring unprecedented resources to … empower financial aid officers at the local school level," Duncan said. "So when family situations change … we absolutely encourage students to talk to the financial aid officers who have the ability and power to adjust what these students receive."
Addressing a question about rising tuition costs, Duncan expressed his belief that, beyond efforts by the government to encourage institutions to keep fees low, the crucial factor is American families' decisions.
"We have by far the best higher education system in the world," he said. "The American public is going to vote with their feet. Those universities doing a good job of containing costs are going to attract people."
A question about textbook costs was also raised and Duncan stressed the importance of innovation in dealing with the issue.
"These costs are devastating," he said. "We want to work with folks who can think very creatively about reducing these costs … in the next few years, we'll see a whole different level of creativity."
Barnes noted that SAFRA is an important component of President Barack Obama's goal of attaining the highest population of college graduates by 2020.
"To get to that goal, we have to make college education more accessible," she said. "[SAFRA] is a smart use of the money … something that we can do to help all of our students and meet the president's goal."
Duncan agreed about the significance of SAFRA. "This bill would literally fund two−thirds of our education agenda," he said. "I can't think of a better time to be investing in young people."
