News Articles

Students may get more loan money, options
Daily Evergreen
September 10, 2003, Wednesday
By Megan Patrick, Daily Evergreen
Washington State U., Pullman, Wash.

A landmark proposal from the Coalition for Better Student Loans, sent to Congress for debate in early September, may ease students' constant grappling for school money.

The coalition is a group of financial aid administrators, parents, loan providers and organizations representing more than 2,000 colleges and universities. The group hopes to revamp the Higher Education Act, which has remained unchanged since the early '70s, says Tim McDonough, Director of Public Affairs for the American Council on Education.

The Higher Education Act, which sets the amount of federal non-research money a college or university is allocated for student financial aid, goes to Congress every five years for review, but is no longer serving the needs of students, McDonough says.

"It was time for a valve job, a full-on tune-up," he says. "The financing structure of our country has changed in the last 20 years, but the act hasn't."

That valve job has turned into a five-part plan to bolster the federal student loan program. In it are recommendations to increase Stafford Loan limits, eliminate origination fees, offer more flexible repayment options and extend loan forgiveness to borrowers in high demand, low-paying jobs.

The government established origination fees in the early '80s in order to reduce the national deficit, which was larger than usual at the time.

The proposal has received some mixed reviews from student advocate groups like the U.S. Student Association, which are wary of increasing the amount of money students can borrow.

Now, freshmen can borrow a maximum of $ 2,625, followed by $ 3,500 for sophomores and $ 5,500 for juniors, seniors or fifth-year students. A maximum of $ 23,000 throughout an undergraduate career is allowed.

If Congress approves the coalition's proposal, freshmen could borrow $ 4,000 and sophomores would qualify for $ 6,000. After two years, students would receive "flexible borrowing accounts" of up to $ 20,000. They wouldn't be allowed to borrow more than $ 10,000 a year or exceed $ 30,000 as an undergraduate, says Chio Flores, Associate Director of Student Financial Aid at Washington State University.

On average, WSU students borrow $ 19,500 for four years, says Wayne Sparks, Director of Student Financial Aid at WSU.

Mary Cunningham, Legislative Director for the U.S. Student Association, says she worries about students having access to that amount of money. "If college groups believe that students' interests are best served by working with the lending community rather than that with the associations that represent students, they are mistaken," Cunningham says.

But Sparks says overall, the proposal is fair and balanced.

He says the loan increase is necessary, especially for first- and second-year students, who many times need just as much money as juniors and seniors. Sparks is also in favor of eliminating origination fees and improving repayment methods, but is slightly concerned that students could have access to $ 30,000.

Community and regional schools share this concern because tuition is usually lower, so giving students access to that much money can't end well for them, Sparks says.

To deal with these concerns, the coalition's proposal allows colleges that want to keep the current loan limits in place to do so. They can also set lower limits for groups, like first-year students, who are at the greatest risk of dropping out.

Sparks and the student associations worry that if loan limits are increased, it is likely Congress will decrease grant funding, which students don't have to pay back.

(C) 2002 Daily Evergreen via U-WIRE