Does CCRAA Measure Up?
This post was written by Michael Bennett
November 19, 2007 6:00 am CCRAA, PLUS Auctions, SimplificationToday NASFAA published comments from several aid administrators about the College Cost Reduction and Access Act (CCRAA). I applaud our colleagues for taking the time write very thoughtful responses. Their perceptions help me see several sides of important issues.
Like others, I feel our money is best spent within the existing Pell Grant program. And where there may be some advantages for tax payers with loan auctions, there are disadvantages for transfer students who will be forced to deal with multiple PLUS lenders (since winning bidders may differ from state to state). And then there is the unintended consequence of parents who may encourage their children to use the same loan provider they were forced to use (since parent’s choice will be limited to the two winning bidders in that state), further undermining the principle of lender choice.
And will the Teach Grant be an empty promise for many students… with enormous administrative complexity and costs? Congress has been talking about simplifying everything, but then continues to create more programs that are ever more complicated.
I’m interested in your thoughts. Which provisions concern you most? Which do you find most positive for our students? Tell me what you think.
November 19th, 2007 at 9:55 am
As lenders are forced to reduce benefits, the end result is that students are paying a portion of their education costs TWICE. As an example, my school’s program costs $15,000 in tuition alone, and Stafford loans combine at a maximum to provide $13,025. As the “zero fee” loans disappear, the net amount coming to the school will be reduced by 2.5% to roughly $12,699. The 2.5% fees of $326 are a part of the loan which must be paid, with interest. However, the student still must come up with that amount to pay to the school for tuition. This means the $326 is being paid twice - once to the school and once WITH INTEREST on the loan. A portion of the “educational loans” is not being used to help the student gain an education. Yes, defaults are a problem, but every student should not be penalized for the failings of some, nor should the opportunity of a college education be denied those students with insufficient credit history to secure private loans. Something is very wrong with this picture!
November 19th, 2007 at 2:41 pm
I think the roundtable hit most of the major CRAA issues. However, with apologies to my friends who participated, I am disappointed in the lack of inclusion of community colleges and state colleges in this group - and proprietary schools.
I think that it is very important that NASFAA be as representative of higher education as possible.
November 20th, 2007 at 9:19 am
Let’s re-examine this characterization of lenders being “forced” to reduce or eliminate borrower benefits. They’re not being forced to do so, they are choosing to. The student loan industry is currently at $85 billion and growing and there are mountains of money out there for lenders to make. They are crying wolf in response to a rather modest reduction in their taxpayer-funded subsidies. I haven’t seen any reports that their executives’ salaries or bonuses - which would pay for an awful lot of origination fees - are going to be cut.
Regarding the PLUS auctions, as a taxpayer, I think that this is worth considering and assessing if it can reduce government costs and still result in the same product. As an aid adminstrator, I wonder where the two-per-state model comes from. Two seems like an arbitrary number, and I don’t understand the rationale or advantage of breaking down eligible lenders by state. Perhaps if Congress wants to limit the number of participating lenders, there should be x number of bids accepted, and those lenders should be free to do business nationwide. Parents encouraging kids to borrow with the same lender - not a problem as far as I see it, the borrower has made his/her own choice, we shouldn’t be in the position to say how they should arrive at their choice.
November 20th, 2007 at 10:18 am
I cannot believe again that I have been denied access to another teacher loan forgiveness program. I have been teaching in LA for 14 years in a high crime, low income, high ethnic minority area and because of my age discrimination, only the young teachers get forgiveness. No one appreciates us. The ones who stay in the trenches year after year. Just want to entice new teachers because how else can get people to replace us when we retire? Who would want our job, right?
November 28th, 2007 at 9:12 am
Actually David, many lenders are being forced to remove cost reducing incentives. The $85 billion dollars is gross, not net profit. Commercial banks like any other business are run to satisfy shareholder expectations (generally profits). The federal loan business is a fairly low margin business, and many commercial lenders cannot meet profit matrices with the inclusion of the fee waivers.
As a tax payer, I personally don’t care to subsidize lender profitability to the extent they can choose to lower the program cost for a student. As an aid administrator I am somewhat stunned at what CCRAA did under the guise of increasing college affordability and access.
November 28th, 2007 at 4:04 pm
I realize there is much yet to learn about the new TEACH grant/loan. Whatever the rules/regulations turn out to be, I think this program is going to be incredibly difficult for the institutions, the recipients, and the school systems they work for to award, decide whether or not to accept, and report to the Dept. of Education. I honestly don’t understand what Congress was trying to accomplish with this program and I wonder if it will ever get off the groud successfully. If it is thought that the participation in the AC Grant and SMART Grant programs was less than anticipated, imagine what is going to happen when students are told “This is a grant now but may turn into a loan as of the day you received it.” Even trying to figure out who will be eligible (based on the current information) seems extremely difficult to me.