Two interesting articles about possible student loan changes

[jsupop33]

Federal Student Loans Would Seem Less Profitable Under GOP Budget Plan

By Kelly Field

Washington

Buried in a Republican budget blueprint released on Tuesday is a one-paragraph proposal that would change how the federal government calculates the cost of its student-loan programs, updating federal scoring rules to account for market risk. The change, if enacted, would make student loans appear less profitable to taxpayers than they currently are.

In the budget proposal for the 2013 fiscal year, Rep. Paul D. Ryan of Wisconsin, chairman of the House Budget Committee, said that accounting for market risk in student lending "would simultaneously reflect their true cost to taxpayers and make risky expansions of these programs less likely to occur."

The proposal was welcomed by the Education Finance Council, an association of nonprofit and state-based lenders. In a statement, the group argued that "there has been a heavy focus on supervision of private student lenders, but not much on holding accountable the largest student lender in the country: the federal government."

Private lenders, including state-based and nonprofit lenders, were cut out of the federal loan program in 2010, when Congress passed a law that abolished bank-based guaranteed lending in favor of 100 percent direct lending from the federal government.

Though the Republicans' broader budget proposal is unlikely to survive in the Senate, where Democrats have already denounced it for cutting too deeply, the change in the cost calculation could be enacted as a freestanding bill or be included in a future budget compromise. Last month the House passed a bill, HR 3581, that would apply such "fair value" accounting principles to all direct loans and loan guarantees made by the federal government. Federal student loans account for 60 percent of all outstanding federally backed credit, according to the Congressional Budget Office.

No Diploma, No GED, No Aid

WASHINGTON -- Students who wanted to attend college, but didn’t have a high school diploma or GED, used to be able to get federal grants and loans through a back door: either take a basic skills test to prove their “ability to benefit†from a college education, or successfully complete six credits.

This year's federal budget, in an effort to trim spending on Pell Grants, shut off both routes. As of July 1, newly enrolled students are required to have a high school diploma or GED in order to receive federal financial aid. College administrators say they worry the new policy will shut out older students seeking training to find a new job, immigrants, and students in states where money for basic adult education has been cut in budget crises.

Either those students will turn to riskier private loans, they say, or -- more likely -- they'll just give up on pursuing higher education.

“This change is just very difficult to swallow,†said David Baime, vice president for government relations at the American Association of Community Colleges. “It runs counter to the missions of many of our colleges.â€

The elimination of federal financial aid for college-bound high school dropouts was one of several cuts in the federal budget for fiscal year 2012. Like many of the other changes, the cut hits especially hard at community colleges and for-profit colleges, which enroll more students based on an “ability to benefit†test than do traditional four-year colleges.

About 836,000 students at two-year public colleges nationwide don’t have a high school diploma or GED. That number includes high school students in dual enrollment programs, so the number of students admitted based on an “ability to benefit†test is smaller, about 82,000 students -- 1 percent of the community college population.

Little research is available on how students without a diploma or GED perform in college. Supporters of the "ability to benefit" clause cited a limited Education Department study conducted during the 2006-7 academic year. At the 14 colleges that participated in the experiment, students who failed the ability-to-benefit test, but went on to complete at least six college credits without financial aid, were ultimately more successful in college (measured in credit hours completed as well as grade-point averages) than were students who passed the ability-to-benefit test, and had higher GPAs than their classmates who were high school graduates.

Read more: http://www.insidehighered.com/news/...deral-aid-based-ability-benefit#ixzz1qGC2upQ0
Inside Higher Ed


http://www.insidehighered.com/news/...y-about-end-federal-aid-based-ability-benefit

Interesting. The feds are moving more and more towards taking hard line stances in Higher Ed.

 

[jsupop33]

The initial gainful employment list will be released soon.