Federal Revenue and Family Income Shifts Due to Major Proposed Changes in Student Loan Policy

This week and next, federal lawmakers will consider a comprehensive overhaul of the terms and conditions associated with over $68 billion in new federally guaranteed student loans distributed each year to more than 10 million students and their families attending over 6,800 institutions of higher education. Changes of this magnitude in federal student loan law were last made over seven years ago and are not scheduled to be considered again until 2012.

In the first independent analysis of the pending and major proposed changes in federal student loan policy recently approved by the key United States Senate and House of Representatives Congressional Committees, the New America Foundation finds that, in short, the budget reconciliation process is facilitating creation of bigger, not smaller, federal college aid programs. Federal financial aid growth will be fueled by higher student loan borrower interest rate payments and fees, as opposed to increased general tax revenues, shifted budget priorities, or increased government efficiency.

In fact, a significant number in Congress appear ready to undermine government efficiency and prop up guaranteed business and profit for banks and non-profit lenders participating in the federal student loan program.

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