Ellington

One quarter of UW students are expected to see an increase in financial aid after congress overhauled the student lending system Thursday with the passage of the reconciliation bill for health-care reform.

The Health Care and Education Affordability Reconciliation Act will increase federally funded Pell Grants. Combined in the legislation with issues such as insurance reform and health-care affordability, the Student Aid and Fiscal Responsibility Act (SAFRA) will increase the maximum annual Pell Grant scholarship for students from $5,550 in 2010 to $5,975 by 2017. The grants will be linked to the Consumer Price Index by 2013 to reflect the cost of living.

According to the Congressional Budget Office, the grant increase would come from the $61 billion savings over 10 years by eliminating subsidies to banks in federal student loan programs. By shifting to a direct-loan program, in which the government would not include banks in the student-loan market, the bill would also place emphasis on income-based repayment by lowering student-loan payments from a monthly cap of 15 percent to 10 percent.

Rich Williams, a higher-education advocate at the U.S. Public Interest Research Group, said that income-based repayment will help students avoid “being crushed by unmanageable levels of debt.”

Kay Lewis, the UW director of financial aid and scholarships and the assistant vice president for student life, said that the UW has been a part of the direct-loan program since 1993 and therefore does not currently participate in the bank-lending program. She said that, while the change to income-based payments will help some, the real impact will come from the Pell Grant increases.

“A quarter of UW’s students receive Pell Grants, which means 25 percent of undergraduates will receive a more stable source of funding for financial aid,” Lewis said.

According to the United States Student Association, a student-led organization that lobbied in favor of the bill, the grant was in danger of being cut by 60 percent. Without the additional funding, students would experience a decrease in Pell Grant funding.

“Temporary money had been added, but without additional money, [Pell Grants] would have had a significant decrease,” Lewis said.

Last year, the UW had 7,500 students – 16 percent of its undergraduates – who received Pell Grants. Lewis said that number has jumped by 14 percent to 8,700 students, mostly from the economic changes and unemployment. Federal formulas to determine the grant amount have also been adjusted in the past two years to help more students become eligible for the grants.

Lewis said that middle-income students who don’t rely on the Pell Grants have the potential to benefit from the educational act as well, as an increase in the Pell Grants may allow other scholarship funds to become available for students who don’t qualify for the program.

Protestors of the bill argue that the legislation is another back-door government takeover of the student-loan industry that will add to the deficit. Additionally, some opponents to the legislation are concerned that, without the subsidies, the bill will prevent students who don’t qualify for Pell Grants from receiving loans.

“A majority of UW college students get their money from banks, currently at a subsidized rate,” said Justin Bryant, president of the College Republicans at the UW. “You’ve taken away any incentive for a bank to make an education loan to a student.”

The bill marks the first legislation in congress to address the Pell Grant program.

“Pell Grants have never had any foundational support where there was some legislative action tied to it,” Lewis said.

Reach reporter Katie Burke at news@dailyuw.com.