Wednesday, March 04, 2009

Sayonara, FFELP!

I don't know if this is really going to go through--certainly the banks are going to fight against it with everything they've got--but Obama's budget calls for phasing out all subsidies to student lenders in favor of the direct loan program, and using the subsidies to fully fund the Pell Grant program and turn it into an entitlement.

Obviously, I have been calling for this for years. I'm sorry it took a global economic crisis and credit crunch to get us here, but publicly supported student lending is definitely the better way to go.

However, these days I'm more concerned about the multiple underlying factors that keep driving the cost of college upward, and increasing federal aid is actually not helping in the long run. For example, last night I visited the University of Tennessee at Knoxville (Go Vols!)

According to what the very intelligent and engaged members of the student Issues Committee told me, The school is going through simultaneous budget cuts and a 9% tuition increase. The budget cuts are so severe that 5 to 7 percent of students won't be able to get into the classes they need to graduate , which may force them to add another semester or even another year, which raises their burden even more! Simultaneously, a giant stadium renovation is going on, to the tune of $200 million. The students are steamed! But apparently the concerns of families and students are not being consulted here.


Anonymous said...

How is increasing Federal Aid not helping?

Michael said...

I am a student at the University of Tennessee (in fact, the one who asked you last night about your optimism in the current economy) and I wanted to provide you with a different perspective.

I go to the University for free. My living expenses are completely paid for, and each semester, even after all my other expenditures, there's about $1,000 dollars in financial aid left over for me to take and play in the stock market with. Of course, that hasn't worked out too well recently, but I'm not complaining, because I knew what I was getting into.

My roommate, my brother and many of my good friends are on the Issues committee (whom you dined with), and if they told you they were having financial difficulties, then they were lying. They're all in the same boat as I am.

We're not alone. According to our school newspaper, more than 10,000 students here at UTK receive more financial aid than they owe in tuition. And the myth about not being able to graduate with the classes they need? I'll graduate this May (in 4 years) with 2 majors and 3 minors. My roommate will graduate (in 4 years) with 3 majors and 3 minors. My brother? Looking at 2 majors and a minor.

And the budget cuts? As I wrote for the school paper, they are economically necessary reductions in unpopular majors. Students with interest in those programs should transfer elsewhere. We all came to UT because it was cheap (or free), and close to home - we shouldn't expect quality that we aren't paying for.

There's no doubt that our generation loves to whine. In many ways we deserve to do a little whining – issues like Social Security, Medicare, and the National Debt spring to mind. Education, however isn’t one of them. I (and the 10,000 other students like me) are living proof that you can still get a reasonably decent education at a discount price.

Anya said...

Increasing Federal aid will reduce cost to students in the short term, but the underlying factors that cause tuition to increase will not be affected. Historically increases in federal aid have been overtaken by higher tuition within a few years.

Anonymous said...

Yeah, I didn't think you'd come out and say why... that Federal Tuition Assistance drives up demand and therefore the price of higher ed.

You shouldn't just quote historical figures without understanding or attempting to explain the genesis of those figures.

Anonymous said...

Here's fact that might just make your head expload...for more than a year lenders have been paying a subsidy to the federal government...not the other way around!

Here's another...find two people who received federal student loans between 2000 and 2007, one FFEL, one DL. Ask what their interest rates are - the FFEL student is paying MUCH LESS than the DL student.

One last tidbit to completely destroy your worldview...the student loan proposal in the budget will add $1 trillion to the national debt!!! Who is going to pay that off??? All of our interest rates (student loans, car loans, mortgages, etc.) will go up with that level of irresponsible spending.

Talk amongst yourselves.

Anonymous said...

Who cares who pays as long as its not us! Party on Anya! Lets get wasted in New Orleans!

Anonymous said...

I agree with U. Anya needs to check her facts. Getting rid of the FFELP would not only increase the default rate of students borrowing (by the way tax payers are footing that bill) but also increase the US national debt. And don't even get me started on service students and borrowers would receive....

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