Reforming Student Loans, Paving the Road to Opportunity
March 02, 2010
12:13 PM EST
I was taught at an early age about the importance and value of a high-quality education to getting ahead in life. Both of my parents are educators. They were the first in their families to attend college. In addition to the values and of hard work and service that they inspired in me, their examples are what motivated me to continue my education and earn a college degree.
The path toward a college degree is one that should be afforded to every American. Moreover, promoting college access and success is critical to the future of our economy. While America ranks seventh in the proportion of young people enrolled in college, we rank fifteenth in the number of certificates and degrees awarded. And while high school graduates from our wealthiest families are almost certain to continue on to higher education, just over half of students in the poorest bottom quarter attend college.
Since arriving in office, the President has made providing a complete and competitive education to all students a national priority. He has called to restore America’s leadership in higher education, with a historic commitment to increase college access and success and a challenge for America to again lead the world with the highest proportion of college graduates by the year 2020.
To accomplish this goal, the President’s plan would dramatically expand financial aid for America’s college-going students, and restructure our student aid programs to make them simpler, more efficient, and more reliable. The cornerstone of the President’s agenda is a plan to shore up and restore the buying power of the Pell Grant – a ticket of opportunity for America’s neediest students – placing it on a path to outpace the rate of inflation each year. The President has proposed the American Graduation Initiative, a comprehensive plan to strengthen an support America’s community colleges. He has focused on giving America’s students the support they need to graduate once they reach college, through new investments to expand innovation and build the knowledge base of successful college completion activities and strategies, at both 2-year and 4-year institutions. The President’s plan would help more students learn and earn college credit through new, high-quality online learning opportunities, and it would simplify the Free Application for Federal Student Aid to make it easier for young people and their families to apply for student aid. The President’s budget also supports our nation’s Historically Black Colleges and Universities, Hispanic Serving Institutions, and other higher education institutions serving America’s minority communities.
All of these reforms are included in the Student Aid and Fiscal Responsibility Act (SAFRA), a legislative proposal passed last year by the U.S. House of Representatives and currently pending in the United States Senate. One of the most impressive features of the President’s higher education plan is that it pays for itself.
Here’s how. Right now, there are two arms to the federal student loan program – the Direct Loan program and the Federal Family Educational Loan program, or FFEL. Direct loans are originated by the U.S. Department of Education and services through competitively-awarded contracts with the private sector. Under the FFEL program, banks front the capital and taxpayers pay them a subsidy to do so. The President’s proposal shifts student lending entirely over to Direct Loans, ending billions of dollars in wasteful subsidies to banks and saving $87 billion over 10 years. These subsidies are a price we cannot afford to pay in today’s economy. Through this reform, we can put students, not banks, first, and reinvest funding in helping more students reach and successfully complete college.
Today at 5:30PM EST, White House Domestic Policy Director Melody Barnes and Education Secretary Arne Duncan will host an online video chat with students from all across America to discuss the Student Aid and Fiscal Responsibility Act (SAFRA). I’d like to invite you to join that web chat and would encourage you to come prepared with questions for our speakers. Throughout his life, President Obama has fought to make college more affordable for all students. SAFRA is an essential first step in reaching that goal.
Roberto Rodriguez is Special Assistant to the President for Education Policy