When President Barack Obama signs the student loan overhaul bill into law on Tuesday, it will represent a radical departure from a longstanding inclination among previous occupants of the U.S. Capitol and the Oval Office to look out for America’s finance industry instead of the nation’s youths.
So says Pedro de la Torre III, advocacy senior associate at Campus Progress, an initiative within the Washington, D.C.-based Center for American Progress.
“Finally, the Congress and the president, after decades of different Congresses and different presidents being scared of special interests [and] to put students over banks, finally are putting students first,” said de la Torre, who was invited to watch the bill-signing ceremony at Northern Virginia Community College in Alexandria, Va.
The measure has been widely hailed as a big win for the college access movement.
The Institute on College Access and Success (TICAS), for instance, said the student loan overhaul is a “major victory for both students and taxpayers” that lays the foundation for making college more affordable and reducing student debt.
“Our country needs this reform now more than ever, as the economy drives people to seek education and training but leaves them less able to pay for it,” TICAS said in a recent statement.
The measure takes banks out of the student loan industry and switches to a federally-administered direct loan program – a move the White House said will save $68 billion, $36 billion of which will be put into the Pell Grant program.
Noting how the measure, starting in 2013, ties annual Pell Grant increases to the consumer price index, TICAS said, “For the first time, students and families will be able to count on reliable minimum increases in the Pell Grant and plan accordingly.”
The measure also modifies the Income Based Repayment program by – starting in 2014 — having borrowers pay 10 percent of their income instead of 15 percent, and lowering from 25 to 20 how many years borrowers have to wait to have their loans forgiven.
The measure might not make a major difference in what youths and their families actually pay for college, but that’s not the point, de la Torre saids.
“If this bill hadn’t passed, half a million students would have been dropped from the Pell grant program,” de la Torre said, adding that those who remained in the program would have seen their grants decline.
Now, Pell grants will rise to $5,550 next year and increase incrementally with inflation beginning in 2014, de la Torre said.
But not everyone who watches coverage of the historic bill-signing on Tuesday will be in the mood to hear Hail to the Chief.
Some, such as Richard Vedder, director of the Center for College Affordability and Productivity, view the signing ceremony as a swashbuckling political affair that ushers in a new era of higher education governance with a Socialist bent.
In a piece penned for a web-based forum called Minding the Campus: Reforming Our Universities, Vedder postulated that the Obama administration’s motivation for taking private companies out of the business of servicing federally subsidized student loans is “ideologically driven.”
By what?
“A deep distrust and contempt for private business, and a belief in governmental control if not ownership of the means of production (which we used to call socialism),” writes Vedder, who goes on to enumerate half a dozen reasons why the student loan overhaul isn’t all it’s cracked up to be.
One reason, he said, is it won’t make much of an actual difference in terms of savings.
“The true societal savings under this new law are almost certainly negative, since there will be a very significant decline in services provided students wishing to borrow,” Vedder said, arguing that taking private business out of the student loan industry is like taking UPS and Fed Ex out of the parcel delivery service and “leaving us with the equivalent of the Post Office.”
“Now, no doubt, students will be given one-size-fits-all generic advice online or in recorded phone messages,” Vedder said.
De la Torre said that while the student loan overhaul is a welcome, more needs to be done to make college affordable. He said colleges and states need to focus more on issuing more need-based grants and fulfilling their social missions and less on college rankings and the like.
“We should all be focusing on making sure that everyone can get this education that’s become a necessity to make ends meet in our economy,” de la Torre said.
