Most CMU students not affected by loan reform

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Students at Central Michigan University likely will not notice major effects from a student loan reform signed into law Tuesday.

President Barack Obama gave the Reconciliation bill his stamp of approval, though it included a few differences from the version first approved by the U.S. House of Representatives on March 21. The law eliminates the nation’s bank-based system of distributing federally subsidized loans to college students.

This reform is expected to spare taxpayers $68 billion over the next 10 years, according to a Saturday news release from the president’s office.

But Diane Fleming, associate director of scholarships and financial aid, said students at CMU will not have to adjust to the reformed system since the university has made loans with the federal government for the last 20 years.

“There’s definitely no changes for CMU students,” she said. “We have been in the direct lending program since the second year of its inception.”

The Reconciliation bill was coupled with health care reform last week, but was sent back to the House after the U.S. Senate found an error in a Pell Grant section. By Thursday evening, both houses had given their approval.

Public reports show the law also expands health insurance subsidies for middle- and lower-income families and Medicare’s prescription drug benefit, adding more than $60 billion to the $875 billion health care reform law also approved last week.

“They wanted to make sure that this got done in time,”  Griffin Endowed Chair Maxine Berman said. “They put them together to make sure, since it’s already March, that it would be available, I’m assuming, for fall.”

Berman said unlike Michigan’s constitution, which mandates all bills must pertain to one topic, it is common in Washington politics to include many topics in one super-bill.

“If you look over the years, you see it’s very common to have a number of topics that have nothing to do with each other in the same bill,” she said.

Fleming said CMU students who receive Pell Grants will still benefit from the reformed system. The money saved from eliminating banks in loan processes will be reallocated to expand funding for the federal Pell Grant program.

If the legislation was not approved, the Obama administration reported an estimated 500,000 students who would otherwise have to be cut from the program and the award reduced by roughly $2,150.

Fleming said the Pell Grant program is currently “running at an $18 billion deficit because it’s not an entitlement program.”

“Congress has to appropriate money for it,” she said.

She said $23.9 million has been handed out to 6,517 CMU students so far this academic year in Pell Grant funds.

“Last year, including summer, we had 5,060 students get a Pell Grant (costing) $15,933,500,” Fleming said. “We’re already at 6,517 (students) and we’re at $23 million. What that says is that we have a lot more families who, because of plant closings, downsizing, recession, lay-offs, are qualified for federal Pell Grants. That’s a huge increase in Pell Grant eligibility.”

In addition to reforming the distribution process, the health care legislation also included provisions to make repaying loans easier.

For individuals who take out new loans after July 1, 2014, only 10 percent of their income will have to be devoted to loan repayment, down from the current 15 percent. Loan forgiveness also will set in for those who keep up their payments for 20 years, a reduction from the current 25-year requirement.