A controversial $2.7 billion Senate plan aiming to make financial aid more affordable passed last month, lowering origination and processing fees for student loans. The plan also funnels $1.7 billion to Gulf coast schools affected by this fall’s hurricanes. The plan is part of a much larger bill trying to cut the national deficit, which currently stands at $1.6 trillion.
The plan’s opponents argue that if lenders have to pay more to the government under this plan, they will charge higher interest rates to students, which could offset the reduced fees. Some fear that students may even be worse off.
“It could hurt students, but it would be indirectly,” said Bill Witbrodt, director of Student Financial Services at Washington University. “It impacts students everywhere of every type.”
Origination fees are those paid upfront to a lender to establish a loan, and the bill lowers them from three to two percent. The University, though, pays no origination fees because of its banking relationships. But Witbrodt still doesn’t approve of the plan.
“I’m against any legislation that diminishes the possibility of providing excess to kids,” he said. “The focus should be on helping students get to college and succeed in college.”
Witbrodt cites other concerns raised by the new legislation.
“Reauthorization has been going on for years,” he said. “It should have happened two years ago but didn’t because of things like the war and the deficit. Also, during no reauthorization before has Congress been charged with cuts for these programs.”
Other aspects of the overall bill include ceasing the funding of Perkins loans, which affects most University students on financial aid, and increasing the ceiling of interest rates on PLUS loans.
Witbrodt is not the only one against these changes. “There’s a lot of lobbying against the bill from student organizations and parent organizations,” said Witbrodt.
The bill also cuts part of Medicare and Medicaid, and proposes to open a new part of Alaska to oil drilling. The White House opposes these cuts and may even veto the bill because of them. Most Democrats and some Republicans are against it as well, so necessary changes will be made before it is voted on again.
If the bill passes through the House of Representatives as well, it will cut an estimated $39 billion, or two percent, off the federal deficit over five years.