So here's what went down:
I called Mark Kantrowitz from FinAid.org. He's a leading financial aid expert. After my first question about the Student Loan bill, in which he told me it was "good but could have been much better," he dropped a serious amount of knowledge. So much knowledge, in fact, that I picked up my tape recorder (a handy dandy Olympus Pearlcorder S701 - every reporter, or second rate entertainment journalist like me, should have one) and just recorded what he had to say.
Full transcription below (this is why I need a personal assistant). And, yes, he really did just TALK for these huge chunks. I transcribed fully because I wanted you guys to be able to pick out the golden nuggets from all the rest.
Me: So why was the other version (the one that passed in Congress) so much better?
MK: Let's take it provision by provision. The previous legislation made the Pell Grant 1% over the inflation rate. Now, why that's not a bold step forward, that's merely maintaining the status quo, it at least eliminated the feast/famine cycles we've seen in regards to Pell Grant funding. You have, for example, years during the Bush Administration when the maximum Pell Grant wasn't increased at all. Then you have the Stimulus Bill doing pretty much a catch up on one year. And so you have some students where the Pell Grant is falling short and some years when it's getting a big boost. It would be much nicer to take this program, which has been in existence since 1973/74 and it's been around long enough that it's not going away and we should just make it into a true entitlement. Now, what the legislation does (that passed) is, after ten years, it keeps the Pell Grant flat for 5 years and indexes it at just the inflation rate for five years. So it's not going to keep pace with the consumer price index over the entire period, three quarters of a percent under the consumer price index let alone keeping pace with the past increases or tuition inflation. I hope it's not the last word on maximum Pell Grant but it falls short of the need. I personally think the program should be doubled and then increased to over 1 % of the inflation rate. Obviously there's a lack of political will to devote new money to the Pell Grant program. It's better than the alternative. If they hadn't passed this legislation the funding shortfall would have required a substantial decrease in the maximum Pell Grant this coming fall. Because the shortfall was much larger than previous shortfalls. It's sufficient that there would have been enough money to simply take the checks from future appropriations to pay the current appropriations. So it's certainly better than having the Pell Grant go down but most of the money went towards maintaining the current level and leaving very little money for any actual increases. And that's partially because the address made it the cost of the Stimulus Bill version. The Stimulus Bill increased it only for one year so it not only has to provide funding for the maintaining the Pell Grant but also bring it up to the level of the Stimulus Bill.
Another example is that they dropped the [something] loan proposal, where they were going to quadruple the annual loan volume. There was a proposal to eliminate the six questions on the FAFSA, reducing it to a single question about assets. And reduce the fifteen benefit questions to one question. So cut one page out of the six page form, which would have significantly simplified the process. President Obama's proposal for improving the income-based payment plan was included in the legislation however it won't go into effect into 2014. It is only available for new loans on that date. It's not available retroactively to previous borrowers.
What this legislation does for current students and current borrowers is pretty much nothing.
Most of the benefits will be available to future borrowers. The main benefit to current students is by mandating that all colleges be in the direct loan program. Any student that was in the FFCF program in new loans or past loans in general, they get the benefit of the lower interest rate in the direct loan program. There's also a higher approval rate. But beyond that, it's pretty much everything.
Me: Why was this included in the health care bill?
MK: It would be more accurate to say that the health care bill was included in the student loan legislation. The house version of the legislation originally passed on September 17 of last year. They knew that the senate wouldn't pass it without budget reconciliation but they also knew they probably needed budget reconciliation on the health care bill so they had to delay any action in the senate until they were ready to take action on the health care reform registration, because there can only be one budget reconciliation bill per budget cycle. So they had to do them together. And now the delay also led to the need to drop provisions from the [student aid] legislation in two ways: first, the legislation was delayed long enough that it needed to be rescored. The congressional budget office scores legislation to identify how much it costs and in a budget reconciliation bill you have to save some money or you can't pass the bill. So you're going to need some of those savings. The original scoring (February 2009) and in the interim enough schools switched into the direct loan program on their own that the scoring was 20 billion dollars less. Essentially, the government still realized the savings but the legislation can't claim credit for it because it's relative to what the current baseline is not the action that the schools took on their own. They can only take credit for the schools that switched to the direct loan program due to the mandate in March session not schools that already switched. So that's 20 billion dollars less. The need to have insure that there be sufficient funding saved (enough deficit reduction) between the student aid and the health care bill, instead of having 10 billion dollars in deficit reduction, they had it at 20 billion. They needed to hedge their bets so that they could ensure there would be enough savings, so they increased the amount of savings. So 29-30 billion dollars in savings in the legislation was no longer able to be spent on student aid.
They eliminated the provisions I mentioned. They couldn't increase the Pell Grant as much as was requested by the president. They eliminated 10 billion dollars in funding for community colleges. They had to cut a College Access Grant from 3 billion to 750 million (a four fold decrease). They had to drop a proposal that cost a billion and a half. A lot had to be dropped as a consequence of those delays.
Me: Is that the last word on the bill?
MK: The bill is now law. There may be subsequent legislation to work on some of the provisions that were dropped from the legislation. The house version of the bill was very popular. It was passed by a pretty wide margin.
[Then he put me on hold and answered a bunch of phone calls. I used the time to organize my Criterion Blu-rays by order of spine number.]
Me: So there will be an effort to reinstate some things from the older bill?
MK: There will be, yes, that would be my guess. Yeah. There's no draft legislation introduced yet. I think they're going to wait a little bit before doing it. Maybe in the fall.
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