Expanding Pell Grants, Ending Government Subsidies to Banks

With a 253-171 vote last week, the Democratic-led House of Representatives easily passed the landmark legislation that would put an end to the Federal Family Education Loan Program (FFELP), the program initiated by the Higher Education Act 1965 to offer students federal guaranteed student loans through private lenders.

Currently, the government pays private FFELP lenders a federal grant for student loans originated. A second federal loan program student – Federal Direct Student Loan Program, started in 1992 – issues federal student loans directly to borrowers through the U.S. Department of Education, without involvement by a third party bank or other lender FFELP.

If the House bill passes the Senate and becomes law, the FFEL program will be dismantled and all federal student loans will become federal direct loans, made directly by the federal government rather than through third FFELP lenders and banks.

Pell Grants

expansion Ending government subsidies for banks

Supporters of this legislation, known as Student Aid and Fiscal Responsibility Act of 2009 (HR 3221), saying that the elimination of subsidies FFELP generate 87 billion U.S. dollars in savings for taxpayers over the next ten years.

Obama was a vocal supporter of the bill, arguing that subsidized FFELP funnel government money to banks and away from students.

“Ending this unjustified subsidy for large banks is a no-brainer for people everywhere,” Obama said on Monday in a speech at Hudson Valley Community College in New York.

The author of the bill, Representative George Miller of California, echoed this sentiment. With its vote to pass the measure and make the government direct the issuer of all federal student loans , said the Democrat and chairman of the House Education and Labor Committee, the House has made a clear choice to stop drawing vital taxpayer dollars through the boards and start sending directly to the dorms. ”

The bill allocates 80 billion U.S. dollars of those savings to fund education initiatives estimated to what many supporters say is no additional cost to taxpayers.

This allocation will invest 40 billion U.S. dollars to expand the federal Pell Grant program, which targets low-income students, increasing the maximum annual Pell Grant award. The bill would also set aside 10 billion U.S. dollars for community colleges to strengthen the nation’s job training and adult education programs, $ 2,500,000,000 for historically black colleges and universities, as well as minority-serving institutions, raise graduation rates, $ 4,000,000,000 for the modernization of the school renovation, and repair projects throughout the country, and $ 8 billion for education programs early.

a criticism of the bill, Representative John Kline from Minnesota, ranking Republican on the education and work of the Committee, noted that the legislation covers only the cost of some of these initiatives for five years, after which the Taxpayers both programs face cuts or tax increases in order to continue funding these initiatives.

Also, Kline revealed, the nonpartisan Congressional Budget Office has recently recognized that the expansion of Pell Grant proposal will actually cost 11.4 billion U.S. dollars more than originally expected – an amount that is not covered by the current $ 80 billion distributed only within the student loan bill.

approved by Parliament, Student Loan Bill Goes to

student grants and Fiscal responsibility Act now awaits the Senate’s vote. In his speech this week at Hudson Valley Community College, Obama assured listeners that the bill clear the Senate and reach his desk for signature into law.

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