As the wrangling over proposed healthcare legislation drags on in the Senate, progress on other bills has stalled, including a piece of legislation that would impact federal student financial aid programs. The Student Aid and Fiscal Responsibility Act, passed by the House of Representatives in September, has yet to see its counterpart taken up for debate in the Senate. Yet the debate over student loan reform is heating up again as the Department of Education and lenders both attempt to press their agendas forward.
Student loan reform has been a topic of contention since President Obama announced his 2010 budget proposal at the beginning of the year. Among them was doing away with the Federal Family Education Loan Program, which subsidizes private banks to make and service federal student loans, such as Stafford Loans and PLUS Loans. Students would borrow directly from the Department of Education through the Direct Loans Program. The money saved from the subsidies would then be channeled into Pell Grants and Perkins Loans, among other education funding priorities. The proposed changes would go into effect on July 1, 2010 necessitating a quick switchover to direct lending for all colleges still participating in FFELP. [...]