October 29, 2009
Five Reasons the SAFRA Act of 2009 May be Bad for Students
A recent article from Gocollege.com lists the 5 reasons why the proposed student aid legislation may be bad for students. Very soon the senate will be taking up this important measure related to college students and financial aid. On the surface the bill looks like a massive step forward for students and families, but the article states that “as the legislation becomes clearer many have begun questioning this massive change. Is the legislation really a positive step for students?”
The 5 reasons the proposed legislation may be harmful to students:
1. The Legislation Eliminates the “Middle Man”: The middle man in this case is the highly valued non-profit agencies, like UHEAA, that work for students and parents offering free college planning and information related to financial literacy and financial aid. Under the proposal the non-profit agencies (UHEAA) would be eliminated.
2. A Potential Increase in Loan Defaults: The non profit agencies also develop greater student understanding of the loan process and as a result a lower default rate on student loans. A recent Deseret News article reveals that Utah’s default rate is THE lowest in the country thanks to UHEAA’s default aversion team. http://www.deseretnews.com/article/705340433/Loan-defaults-lowest-in-Utah.html?pg=2 “Achieving the lowest default rate in the nation doesn’t happen from Washington, D.C.”, said Senator Hatch. “It comes from experienced and knowledgeable local people taking the time to give personal attention.”
3. No Savings for Students or Families: The article points out that the schools currently using a loan program other than the Direct Loan program will have to invest staff, time and monetary resources to change systems and processes. The costs of implementing this program will likely be passed on to students through increased tuition and fees.
4. Handling the Increased Demand: The U.S. Department of Education will be tasked with converting an average of nearly 500 schools a month over a 9 month period. In the past, the program has converted 1600 schools over a 16 year time frame.
5. Increasing the National Debt: According to the Office of Management and Budge (OMB), the debt that switching to an all Direct Loan program will incur will raise the national debt by $900 billion dollars over 10 years. Those students who benefit from the program will actually pay twice, once when paying off the original student loan and a second time when paying taxes necessary to eliminate the increasing national debt.
For more information and to read the entire story, please visit gocollege.com http://blog.gocollege.com/2009/10/26/the-student-aid-and-fiscal-responsibility-act-of-2009-2/Posted by: kpage