The Obama Student Loan Plan
by Randy Schmidt
As the country looks forward to the change promised for many months on the campaign trail, President-elect Barack Obama prepares his higher education plans. Obama has begun to outline his plans for revamping a student aid system that recently appears broken. Several of the highlights include:
· Obama proposes to eliminate the Free Application for Federal Student Aid (FAFSA) all together. Under Obama’s proposal, student would no longer wait for the Aid Report but would instead utilize their tax return to determine student aid. This “new” method would allow students to determine aid much earlier compared to the current process. The “new” method however may not allow student to realize the benefit of changing circumstances.
· Obama proposes to focus on costs as well. In order to reduce the cost of education, Obama propose to create “The American Opportunity Tax Credit”. Under this program, a “universal and fully refundable credit” would pay for the first $4,000 of any college education. It is unclear how the “new” credit would work with existing tax credits and deductions. Also, under Obama’s plan student utilizing the credit would be required to perform 100 hours of community service.
· In order to assist low-income families, Obama is proposing to increase the maximum Pell grant. Details remain scant on both what the increase would be and perhaps more importantly, how the Obama administration proposes to pay for such an increase.
· One way an Obama administration may attempt to pay for an increase in grants is to eliminate the Federal Family Education Loan Plan (FFELP) and the subsidies paid to lenders. Such a mandate may solve the budget issues of the government but would eliminate the competitive environment schools and student benefit from today.
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