The U.S. House of Representatives recently passed legislation that overhauls the financial aid system by expanding aid, shifting to direct federal lending and removing subsidies to private lenders.

The bill, authored by Rep. George Miller, D-Calif., passed with a 253-171 vote in the House on Sept. 17.

According to the House Committee on Education and Labor’s website, the Student Aid and Fiscal Responsibility Act, if signed into law, will save taxpayers $87 billion in the next 10 years.

“This legislation makes important investments to help make college affordable and accessible for all eligible students,” said Melissa Salmanowitz, spokesperson for the House Committee on Education and Labor.

“It will help us transform our student aid programs so that they finally operate in the best interests of students, not banks, and help relieve the burdens of overwhelming debt,” she said.

The bill proposes allotting $40 billion to expand the Pell Grant.

The maximum award will be increased from $5,350 to $5,550 in fiscal year 2010-11 and to $6,900 by 2019.

“As the most need-focused federal financial aid program, strengthening Pell is essential to closing the gap in college enrollment and completion that exists between low-income students and their affluent peers,” said California State University Chancellor Charles B. Reed on May 19 in his statement before the House Committee on Education and Labor.

If the legislation is approved in the Senate and signed into law, the Federal Family Education Loan program will be eliminated.

All federal student loans will be given through the Direct Loan program by July 1, 2010.

Under the current system, CSU campuses participate in both the FFEL and the Federal William D. Ford Direct Student Loan, or Direct Loan program.

In the FFEL program, students choose the private lender. Both the student and the university have to work with servicers and loan guarantors.

As of fall 2009, 15 CSU campuses, including Sac State, switched to the Direct Loan program.

“We felt that if we wait until it’s mandatory, there’ll be problems,” Yamamoto said.

Yamamoto said the Direct Loan program reduces chances of error because there are fewer people and agencies involved in the process.

When Sac State was using the FFEL program last year, private lenders were giving benefits to borrowers.

Now that government is reducing subsidies for FFEL, and there are not anymore benefits, Sac State has decided to switch to direct federal lending, Yamamoto said.

“I think it’s good that it’s coming from the government instead of a private lender,” said Ladamia King, freshman health science major. “It just feels safe if it comes from the government.”

King hasn’t received her student loan funds for fall 2009. She said she’s been coming back to the Financial Aid Office every day to check on the status of her loan.

“They might drop my classes because I haven’t paid my fees,” King said. “When I applied for spring 2009, it didn’t take this long.”

If students or their financial aid are not able to pay the fees by the census date, which is the fourth week of instruction, the university drops the classes.

“It’s better if the private lenders are retained to keep competition and keep interest rates lower,” said Albert Lin, junior accounting major. “If government has control, students have no choice but to borrow from the government.”

Kristine Guerra can be reached at [email protected].