Lawmakers Offer Direct-Loan Plan.

Navigation: Main page

Author: Brush, Silla

A bipartisan group of senators and representatives has introduced a bill that aims to generate more than $17-billion in scholarship aid over the next decade by enticing colleges to participate in the direct-student-loan program instead of the guaranteed-loan program.

The introduction of the bill, the Student Aid Reward Act, is the latest development in a decade-long battle over direct lending, which has pitted advocates for banks and other financial institutions that participate in the traditional guaranteed-loan program against lawmakers who seek to bypass the companies. The bill's sponsors rely on government estimates showing that direct lending is cheaper because it eliminates federal subsidies the government gives to banks that take part in the traditional loan program.

The bill advocates using those savings to provide extra money each year to colleges that choose direct lending, a program begun under the Clinton administration in which the government provides loans directly to students through their colleges. According to the bill, the extra money could be used to raise the maximum Pell Grant by $1,000, to $5,050.

~~~~~~~~

By Silla Brush