U.S. Rep. Tom Petri, R-Wisconsin, with the support of Rep. George Miller, D-California, is planning to re-introduce a bill that would potentially allow students who already receive Pell Grants to be eligible for more money.
Millions of dollars in extra Pell Grants could be granted to students if the bill is signed into law, according to Petri and Miller.
The Bipartisan Student Loan Bill would allow the federal government to give loans directly to students. It would cut out the middleman, such as banks, and thus save a substantial amount of money that could be given to students.
Schools who utilize direct student loans would receive half of the federal savings in the form of Pell Grants for their students.
“Each year the school would get a substantial amount per student,” said Jason Delisle, Legislative Assistant for Congressman Petri.
In the past, the government has had the ability to dictate policies and procedures; sometimes because it is the law and sometimes because they could, said Steve Van Ess, University of Wisconsin director of financial aid.
“All of a sudden, when competition arose, the government began to treat the consumer better,” Van Ess said. “When the direct loan program was first introduced, UW-Madison decided to stay with [the Federal Family Education Loan program].”
Students have four other partners in the FFEL program: the government, banks, guarantors and schools, all of which work together to organize the loan process. The banks serve as the middleman in the coordination process.
“The main point of opposition is that some Republicans like the private loans because it involves banks,” Delisle said.
Previous to the direct loan program, UW had been begging banks to come up with a standard form for application. As soon as the direct loan program came into existence, they got together and made a standard program in order to compete, according to Van Ess.
Under the direct loan program, the government still needs to borrow money to fund the loans, and many of the same banks will fund them with loan money.
FFEL has recently been a preference over the direct student loan because it offers students better benefits. For example, The Great Lakes bank used by the University waives the one percent fee and thus saves nearly a million dollars a year.
“I think it will work. It will impact the balance of power between the two, and if it prices out the way they say, schools would and should go to direct lending,” Van Ess said. “[This] would mean the end of FFEL, and the end of competition.”
Congress will be voting on the Bipartisan Student Loan Bill in the next two weeks.
“I think it is a good idea probably to have the banks cut out because that is one less person trying to take profit, which will save the students money,” said Jason Robey, UW sophomore and financial aid recipient.
