Ask the Eagle: How will pending legislation affect my financial aid?
by the Crested Eagle
DEAR ASK THE EAGLE: I hear that the government is changing student loans. Is this true and how will it effect my education at OKWU? – ANONYMOUS
DEAR ANONYMOUS: First of all, yes, the government is considering sweeping changes to the student loan process. In fact, a bill passed the House of Representatives by a 253 – 171 vote on September 17, 2009.
This bill, if made law, will overhaul the student loan process as we know it by cutting off private lenders and expanding federal loans. The Democratic Party particularly commended this bill because, in their assessment, “[it] made a clear choice to stop funneling vital taxpayer dollars through boardrooms and start sending them directly to dorm rooms.”
Although this new plan could potentially save taxpayers and students upwards of $80 billion, there is also speculation that this could leave more than 30,000 people without jobs. Also, since the government would decide who receives financial aid through the collection of information in the Free Application for Federal Student Aid (FAFSA) and who does not, it could potentially be much harder to receive adequate financial help.
The federal government currently provides loans in two ways: by directly loaning the funds to individuals (direct loans) and by financially supporting lenders willing to loan money to those in need (Ford Federal Educational Loan Program—FFELP). FFELP is the program that the university currently utilizes.
If the bill is fully enacted, the government will cease to support organizations willing to provide loans, and simply issue all loans directly through the U.S. government. By directly providing the loans to students, the government hopes to save time and money.
Since 95% of current Oklahoma Wesleyan University students use student loans to finance their education, how will this affect you and your education?
The first thing I would advise is to seek to minimize student loans as much as possible. Look into scholarships and federal grants. Paying off student loans is one of the main leeches on America’s wallet today, by minimizing the amount of loans you take out, you may be able to enjoy your life debt-free by paying them off more easily!
If loans are absolutely necessary, there will be ways to receive help. Even though the money may be coming from a different place, odds are, if you used to qualify for student loans, you still will after the big change takes place. The process will likely change – there will probably be more paperwork to complete and you may have to track loans from two different places—your private lender and the Department of Education.
There are also lenders who fall into another category known as “private lenders.” These organizations receive no governmental aid for handing out loans, so when the government cuts off support to banks and other lenders, they will continue to do business just as before, though they may become more restrictive in their lending. The problem with private lenders is that since the government does not support them, they do not have to abide by Congress’ set interest rates, and the rates are even subject to fluctuation over time.
Regardless, keep your eye on these loan issues and even write your congressman or senator to let them know how you feel about it. Be involved in decisions that are affecting you.
Lee Kanakis, OKWU’s Director of Student Financial Services, contributed to this response.
