On March 23, as Sabrina Ford, 19, was buzzing around Washington making one final push for the student loan reform bill as part of a lobbying drive organized by the United States Student Association, she got an email from the financial aid office of her college, Eastern Michigan University. Ford, a first year student from Ypsilanti studying marketing and political science, had asked about how she might pay for summer courses. The financial aid office informed her that she had already maxed out her loans for this academic year and suggested she look into private loans. But Ford, an independent student raised by her grandparents, doesn’t qualify for private loans because she doesn’t have a credit-worthy co-signer or an established credit history herself. So there went her plans for the summer.
As for the fall, Ford says she “has no idea how I’m going to pay for next year.” As a high-scoring student, Ford qualified for the Michigan Promise Scholarship, which gave her $4,000 over four years to help pay for college. With each semester costing about $10,000 in tuition and room and board, Ford was counting on that money. She was notified in the middle of her first semester that the program would be discontinued, a victim of the state’s budget cuts. About 96,000 students received some aid from that program.
“Right now, the main stress in my life is not school papers,” Ford says, “It’s figuring out how I’m going to come back next year. I have no idea how, and it scares me.” Ford has even considered joining the military to help pay for college, even though she “doesn’t agree with the war and doesn’t really know what she would be fighting for.”
The student loan bill that just passed the Senate by a 56-43 margin–with all Republicans and three Democrats (Senators Lincoln, Pryor and Ben Nelson) voting against it–won’t relieve all of Ford’s anxiety. Despite Republican cries about a government takeover of education, the bill is no Bundesausbildungsförderungsgesetz. But it is a significant victory for students nonetheless. It eliminates the Federal Family Education Loan Program, a corporate welfare trough for private lenders, and expands the government’s direct lending program, which will have higher approval rates and generally lower interest rates. With some of the $61 billion in savings over ten years, it expands the Pell Grant program by $36 billion. And it sets aside $1.5 billion to subsidize an income-based repayment program that caps monthly loan payments to 10 percent of a borrower’s discretionary income for a 20 year period.
The bill also means curtains for the piggy private student loan industry, which spent at least $62 million this past decade lobbying against it and other reforms. With their last gasps, loan giants like Sallie Mae cynically tried to argue that the bill would scrap thousands of jobs at “a time when our country can least afford to lose them.” In fact, says Lauren Asher at the Project on Student Debt, “the bill would actually create jobs since the direct loan program requires that all servicers operate in the US.” In anticipation of the legislation’s passage, Sallie Mae recently moved 3,400 loan servicing jobs back to the US from overseas outsourcing centers.
The problem with the bill, however, is that for current students like Ford, some of these changes will be too little, too late. Here’s how the legislation could help her. She could be eligible for more loans at lower rates (the direct lending kicks in this summer)–that’s an undeniable and immediate good that could allow her to attend college next year. Since the confusing and sometimes misleading torrent of solicitations from private lenders will be eliminated, the process for applying for those loans will be streamlined and more transparent. That’s good for Ford, who says she “spends hours counting every dollar” and navigating the current loan and grant maze. Ford says she doesn’t mind taking out loans to finance her future, as long as she knows she can pay them off. Lower and clearer interest rates will help her make these calculations.
Ford also receives a Pell grant, but alas, the increase won’t mean much new help for her. The bill ups the maximum grant from $5,550 in 2010-11 to $5,975 by 2020 (down from $6,900 in the original legislation)–so Ford won’t see any real boost by the time she graduates, and neither will future students really. Still, just by mandating increases tied to inflation, the bill assures Ford that the Pell grants will keep coming (unlike the Promise Scholarship that was suddenly cut) and that their value won’t erode at the drastic rate they have been. According to Asher, Pell grants covered 75 percent of college costs in the late ’70s, now they cover about 35 percent.
As for the expanded income based repayment program–it could have potentially meant the biggest help for Ford, who says she wants to go into public service when she graduates and some day run for Congress. By linking repayments to income, it mitigates the soul-destroying, civic sphere-shrinking effects of high student debt, which forces students to seek out more lucrative careers over ones like teaching, community organizing and, yes, governing. Unfortunately, the program doesn’t go into effect until 2014.
Still, I suspect that Ford is ecstatic that the measure passed. When I talked to her on Tuesday she was hard at work “convincing my government that I deserve an education.” She was doing it, she said, because of her own circumstances but also because she was thinking about “all the students who must be in an even worse situation.” If this bill works as planned, the low- and middle-income students who come to Eastern Michigan as freshmen when Ford is a wise senior will, in fact, be in a better situation–thanks in part to the thousands of student activists like Ford who fought the bank lobby—and won.