Capital News Service

of the Michigan State University School of Journalism

Student loan changes buried in health care bill

Capital News Service

LANSING – A largely overlooked piece of the massive national healthcare legislation will put a different face on aid for Michigan College Students.

Major changes include eliminating subsidies to private lenders and increasing Pell Grant amounts.

Currently the maximum award is around $5,300 and about 317,600 Michigan students receive Pell grants according to the White House.

“This legislation is primarily geared towards supplying an additional funding source for the Pell Grants as opposed to giving it to private lenders,” said Michael Rotundo, director of financial aid at Northern Michigan University. “It’s rerouting the funding so that it helps our neediest students to have access to higher education.”

Pell Grants help low-income students pay for college.

The change will expands federal direct lending and save $61 billion over 10 years by cutting out fees paid to private lenders, according to the Congressional Budget Office.

The U.S. Department of Education would make federal loans directly to universities and colleges.

Under current law, banks and other lenders are allowed to distribute federally-backed student loans, a practice which the legislation prohibits.

It increases Pell Grant funding by $36 billion over the next 10 years and authorizes annual increases in maximum Pell Grant awards based on inflation.

Rotundo said additional funding is more important for Northern than the direct loan provision.

His university has had a direct loan only program since the mid-1990s because it was more efficient for northern and its students than going through banks, according to Rotundo.

Mike Hansen, president of the Michigan Community College Association, said that it’s too early to tell what the effects of the change would be.

“The proof will be in the pudding, once we move towards direct loans, if this is a better system,” he said.

Gail Madziar, vice president of communications and membership for the Michigan Bankers Association, said that she has heard little reaction from the banking industry in the state on the changes.

“Everyone agrees that more financial aid to students is a good thing and we wouldn’t want to see cuts in financial aid,” Madziar said.

Madziar said that because community and local banks don’t do a lot of work with student lending, there probably won’t be a large number of banks that are significantly impacted.

However, she did expressed concern that the legislation will leave students with fewer places to borrow from.

© 2010, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Filed under: Legislation

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