In September 2009, the House of Representatives passed the Student Aid and Fiscal Responsibility Act (SAFRA). This act aims to make college more affordable for more American families. It would do away with the Federal Family Education Loan program, which subsidized and guaranteed private student loans. Instead, the federal government would issue student loans directly, saving an estimated $87 billion over 10 years. The money could be used to help even more students pay for college.
Currently, if you want to apply for a student loan, you have the option of going either government or private. Depending on your financial need, the government may subsidize your loans to make them more affordable. If SAFRA passes the Senate and is signed into law by President Obama, private loans would no longer be subsidized. Instead, you would have to borrow directly from the federal government, who would ensure competitive student loan rates.
In addition to terminating the Federal Family Education Loan program, SAFRA would increase the maximum Pell Grant [1] from $5,350 in 2009 to $5,550 in 2010 and $6,900 in 2019. This is a need-based grant available for students from low-income households. It would also increase funding to historically black colleges, expand early education programs, and simplify the Free Application for Federal Student Aid (FAFSA [2]) form.
This bill is good news for anyone who qualifies for the Pell Grant. The extra funding would relieve some of the financial strain on low-income students. The simplified FAFSA form would make it easier for people to apply for financial aid without jumping through so many hoops. As a result, higher education would be more accessible to people who are worried about how they’ll pay for college.