Obama Proposals Would Increase Student Aid

By CityTownInfo.com Staff
March 12, 2009

President Barack Obama's student loan proposal calls for sweeping changes in Pell grant funding, lenders and loan amounts.

The New York Times reports that the overhaul to federal aid would increase the maximum Pell grant to $5,550 in 2010-11, an increase from $4,731 currently. In addition, the maximum grant would be indexed to the Consumer Price Index plus 1 percent - a significant change to the current system, which now depends on the federal budget during any given year.

"These changes would mean a guaranteed stream of funding that would adjust with inflation," noted Kat Barr, a political outreach director who addressed George Washington University students in a conference on student debt and was quoted in the GW Hatchet. "Pell Grants would no longer be subject to the whims of Congress or the economy."

The Times notes that the most controversial portion of the proposed budget involves eliminating private student loan programs through banks and companies such as Sallie Mae. Instead, students would borrow directly from the government.

The Michigan Daily notes that increasing direct federal loans would be beneficial for students. "The more money available for loans and grants, the greater opportunities students will have," said Mike Boulus, executive director of the Presidents Council State Universities of Michigan. "Because the more federal dollars available, guaranteed from the federal government, the less students will have to rely on private loans which are becoming very, very scarce right now."

Most significantly for students and families, the Obama proposal calls for expanding the Perkins loan program, allowing students to pay for college without turning to private lenders. The administration wants to make the loans available at the more than 4,000 colleges and universities throughout the country. Currently, the Perkins program is only available at 1,800 schools. The money available for the Perkins loan program would be significantly increased from $1 billion a year to $6 billion annually.

Finally, the Obama administration wants to increase the amount students can borrow through Perkins to match what is available though the Stafford loan program, which provides up to a total of $31,000. Currently, undergrads can borrow up to $20,000 through the Perkins program.

The downside to the proposal is that interest on Perkins loans would accrue while a student is enrolled at college. This, notes The Times, is one way the government plans to pay for the Pell grant increases.

In addition, the actual impact on individual students would be modest. If approved by Congress, the benefits would first be available in July 2010, and would essentially provide individual students with a few hundred dollars more in grants, and a few thousand dollars more in loans.

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