COLUMBIA — U.S. Senate candidates Todd Akin and Claire McCaskill don’t agree on dollars and sense when it comes to the federal government's role in providing loans and other financial aid to U.S. college students.
Throughout the campaign season, McCaskill, the incumbent Democrat seeking a second term, and Akin, the Republican congressman who's seeking election to the higher chamber, have offered contrasting views about the Student Aid and Fiscal Responsibility Act. The act eliminated Federal Family Education Loans, a program through which the federal government offered banks subsidies for providing student loans and covered the banks' losses when borrowers defaulted.
Under the new Direct Loans program, which took effect as a rider on the Health and Education Reconciliation Act of 2010, the federal government no longer subsidizes banks’ student loans but instead loans money directly to students.
At a Sept. 21 debate at the Holiday Inn Executive Center in Columbia, Akin expressed support for re-establishing the Federal Family Education Loan program.
“Why don’t we leave it the way it was a few years ago where private lenders could be involved in student loans?” Akin said. “Just because you believe in private lenders doesn’t mean you don’t believe in student loans.”
McCaskill countered by saying the government saved money and was able to help make college more affordable by eliminating federal subsidies for loans made by banks.
“What we did is we took the middle man out of the student loans and took that cut they were making with no risk because the federal government was backing those loans, and we took that money and increased the amount of Pell Grants,“ McCaskill said.
How does the debate play out at the MU Office of Student Financial Aid? Six years of data show that more students are receiving Pell Grants and that those grants are coming in larger amounts since the change took place. The same is true for federal student loans.
Bradley Curs, an associate professor of educational leadership and policy analysis at MU, said eliminating the federally subsidized bank loans helped save the Pell Grants.
“Part of it was we would’ve had to cut the Pell Grant if they didn’t cut the FFEL,” Curs said. “The Pell Grant didn’t keep up with inflation. Congress started trying to fix that at the end of the Bush administration and the start of the Obama administration.”
Pell Grants don't have to be repaid. Congress sets the maximum Pell Grant award in its annual budget.
Students applying for financial aid file the Free Application for Federal Student Aid, known as FAFSA, every year. The FAFSA form calculates a rough estimate of how much a family can afford to contribute toward a student's college education.
The amount a full-time student is eligible to receive through a Pell Grant is the maximum minus the student’s "expected family contribution." For example, a full-time student whose family was expected to contribute $1,000 in 2010-11, when the maximum Pell Grant available was $5,500, would be eligible for $4,500.
MU’s financial aid data show that since 2005 there has been a steady increase in the percentage of students relying on Pell Grants and loans to pay for college, with the largest spike occurring in 2009-10. The percentage of MU students receiving Pell Grants hovered between 15 percent and 17 percent from 2005-06 through 2008-09. The number jumped to 20.04 percent in 2009-10 and rose again to 22.94 percent in 2010-11.
In 2009-10, the average amount awarded per Pell Grant also rose from $3,159 to $3,866, an increase of 22.36 percent. Part of the increase could be attributed to the $727 boost in the Pell Grant’s maximum amount in 2009-10. Even when accounting for that, though, the average grant still increased most in 2008-09 and in 2009-10.
Curs said the increase in the number of students receiving Pell Grants and the amounts of the grants are a result of the nationwide economic collapse of 2008.
“That’s just the economy tanking a little bit and more people qualifying for them,” Curs said.
Congress passed the Health Care and Education Reconciliation Act in the summer of 2010, meaning its effects would first show up in the numbers from the 2010-11 school year.
Although the numbers don’t increase as sharply as they did in 2009-10, Curs said the act’s effect still shows in the data. Curs said Pell Grant funding would have been cut drastically if Congress had not cut the Federal Family Education Loan.
“They cut the FFEL to save money,” Curs said. “Not necessarily to make Pell Grants stronger but to keep the Pell Grant as is. Students on Pell are better off because FFEL was cut. The Pell Grant remains stable.”
Curs also noted that Pell Grants’ maximum amounts fall well below MU’s cost of attendance, but he said he estimated the changes made by the Health Care and Education Reconciliation Act help students pay for college with a combination of Pell Grants and federal loans.
The federal government can issue three types of loans. Direct subsidized loans accrue no interest while the student remains enrolled full time. Direct unsubsidized loans accrue interest from the time they are initiated. The federal government also provides Direct PLUS loans to students' parents. The MU data show the amounts borrowed through all three programs increase at roughly the same pace as tuition costs.
Curs explained that while the amounts awarded in loans didn't change much, he believes the difference in Pell Grant funding has helped students use their available forms of financial aid to pay for college.
“My guess is students at Mizzou are better off because of this change,” Curs said of the restructured program. “It doesn’t cover everything. That’s why they still take parent loans. My guess is that if you’re a low-income student at Mizzou, Pell Grants, subsidized loans, unsubsidized loans and parent loans should cover the cost of education.”
Supervising editor is Scott Swafford.