CORRECTION: The direct lending program UCLA is adopting will be operative at the end of the 2009-2010 academic year, in time for the 2010-2011 award period starting in Summer 2010.
After a string of financial blows to higher education and the University of California system, things are finally looking up for college students.
Included in the final health care package, signed into law by President Barack Obama last week, was a restructuring of the federal student loans programs which cuts private bank lenders out of the federal loan market.
The change will redirect more money to aid low-income students through the form of Pell grants, which will receive $36 billion more in aid over the next 10 years, according the Congressional Budget Office.
Such a move admittedly increases the role of the government in student affairs. Some will say that the government is biting off more than it can chew. Federal programs are not known for their efficiency.
However, this board commends the reform in the federal loan program and believes the change has been long overdue.
For years, the government has assumed almost all the risk on student loans while also giving the banks federal subsidies for lending the money to students, essentially running up government costs to pad the pockets of bankers.
By ending the Federal Family Education Loan program, the new legislation will save taxpayers $61 billion during the next decade. Of that, $40 billion would go to educational initiatives.
In cutting down on such unnecessarily high government costs, the law creates a gateway for more funds to be directed toward aid for low-income students.
While the thought of possibly having to consolidate loans and have a “one-fits-all” loan system might create some skepticism, this board is confident that all students will benefit from the change, including those who receive financial aid and those with outstanding debt.
Upcoming graduates with a high amount of debt will also reap the immediate benefits from the new law. Monthly loan repayment plans will be capped at 10 percent of the student’s net income under the new law, instead of the current 15 percent.
UCLA financial aid administrators had already noticed that the economic instability did not leave lending institutions unaffected. UCLA has already begun transitioning to a direct lending program and will be done by the end of the 2009-2010 academic year, in time for the 2010-2011 award period starting in Summer 2010. It is promising that the federal legislators are finally listening to universities who are trying to meet student needs.
The board also recognizes that the new law is not as far-reaching as the original proposed bill, which if passed would have also increased funding for early education and community colleges. Still, the new law will streamline the lending process for borrowers while extending the funds available for Pell grants, which have already been stretched thin because of high demand.
Students now have a system of financial aid that has their best interests at heart. It’s about time.
Unsigned editorials represent the majority opinion of the editorial board.