The passage of the Health Care and Education Affordability Act by the U.S. House of Representatives on Sunday could reduce costs for Yale students and the Financial Aid Office, Caesar Storlazzi, director of Student Financial Services, said Monday.
The new bill, which the Senate is expected to pass by the end of the week, would invest $61 billion in Pell Grant scholarships for low-income students and other college aid programs. Under the legislation — an amended compromise on the originally proposed Student Aid and Fiscal Responsibility Act that since stalled — all colleges and universities would be required to convert to a program that loans students money directly from the federal government rather than private loan providers.
The Yale Financial Aid Office and three financial aid experts interviewed said while Yale students would be largely unaffected by the new bill, those hoping to pursue less lucrative careers could benefit from the legislation’s $1.5 billion investment in the income-based loan repayment program. Increased federal spending on the Pell Grant program would also help reduce Yale’s financial aid expenditures, Storlazzi said.
“Students will not notice any change in the dollar amount of their loans,” Storlazzi said. “The only change will be the source of their loans.”
Beginning in 2013, low-income students who qualify for Pell Grant scholarships would see their aid adjusted to inflation. The maximum grant would also gradually increase over the next seven years, from $5,550 to $5,975. Currently, 682 Yale undergraduate students receive Pell Grants, according to the Financial Aid Office.
“The increases in Pell Grant funding reduces the amount Yale needs to spend on providing financial aid,” Storlazzi said. “And if adjustments are made to the eligibility criteria to include higher-income students, there could be further savings.”
The new legislation would also forgive loans and associated interest that remain unpaid after 20 years, rather than 25. Borrowers would be able to cap their monthly loan repayment at 10 percent of their discretionary income, down from 15 percent, said Mark Kantrowitz, publisher of FinAid.org, a Web site that offers financial aid information and advice to college-bound students.
While this legislation would not take effect until 2014 and will not apply retroactively, it should offer some reprieve to students hoping to pursue lower-paid careers in the public sector, he said.
But the key amendments that were added to help the bill pass will not affect Yale students, said Justin Drager, vice president of Public Policy, Advocacy, & Research at National Association of Student Financial Aid Administrators, a non-profit organization that represents college financial aid administrators.
Such amendments include reducing the planned increase to the need-based fixed interest Perkins Loans program (which Yale no longer offers) from $6 billion to $1 billion, cutting grants for community colleges from $10 billion to $2 billion, and reducing College Access grants, largely directed at low-income community college students, from $3 billion to $750 million.
Yale began converting to the federal direct loans program last November and will complete the process by the fall of 2010. Since last summer, administrators have spent a “significant” number of hours updating the software and administrative procedures necessary to make the change, Storlazzi said.