WASHINGTON — Despite the appeal of a “simplified” version of the federal student aid system, efforts to move toward a single loan and grant program and a simpler version of the Free Application for Federal Student Aid, or the FAFSA, could actually make things worse for low-income students.
That was one of the key arguments made Tuesday at a U.S. House higher education subcommittee hearing on ways to improve the way the federal government issues grants and loans.
“There is a lot of discussion about ‘simplifying’ the loan programs, which often means reducing the number of borrowing and repayment options for students or eliminating other critical benefits,” said Youlonda Copeland-Morgan, vice provost for enrollment management at the University of California, Los Angeles.
“Congress must reject proposals like this and instead support changes that enhance student benefits and improve how student loans are administered, disbursed, serviced, and repaid,” Copeland-Morgan said.
A “one loan” proposal that has been put forth as a possible option under Higher Education Act reauthorization would eliminate the undergraduate in-school interest subsidy, which would result in a loss of $41 billion to student borrowers, Copeland-Morgan said. The proposal would also eliminate the Grad and Parent PLUS loans.
A budget proposal released recently by the administration of President Donald J. Trump would eliminate the Federal Supplemental Educational Opportunity Grant program, which enables campuses to provide grants to the neediest students.
“We’re advocating, especially because of the loss of purchasing power in Pell Grants, that we retain these programs,” Copeland-Morgan said. “They work.”
Copeland-Morgan said that, while efforts to simplify the FAFSA have appeal, it could make things more difficult for low-income students, because states and institutions of higher education would have to reintroduce their own forms to determine if students are eligible for state and institutional aid.
“So eliminating or simplifying FAFSA would simply lead to where we were before, which is when students wanted to apply for state or institutional aid, they had to fill out separate applications because the needs analysis at the federal level didn’t meet states’ and institutions’ needs,” Copeland-Morgan said.
Other witnesses called to testify before the House Subcommittee on Higher Education & Workforce Development Wednesday touted the benefits of moving to a one loan, one grant system.
JoEllen Soucier, executive director of financial aid at the Houston Community College System, said the concept of “one grant, one loan” could be “a step in the right direction in terms of simplifying the types of aid available to a student as long as it is done in a meaningful way and policymakers recognize that a student’s financial aid award letter may never be as simple as one grant, one loan, and one work program.
“Existing state, local, and institutional grant and loan programs will continue to appear on a student’s award letter,” Soucier said.
Subcommittee Chair Brett Guthrie, R-Ky., lamented that the federal student aid system has “become too complex.”
“Students and their families are forced to navigate six different types of federal student loans, nine different repayment plans, eight different forgiveness programs, and 32 deferment and forbearance options — each with its own rules and requirements,” Guthrie said. “We need to get rid of the complexity.”
Matthew Chingos, a senior fellow at the Urban Institute, pushed for the “one grant, one loan” approach.
Eligibility should be determined automatically using tax records, which would eliminate the need for an application form, Chingos said.
Chingos also called for the elimination of the Parent Loan for Undergraduate Students, or PLUS Loan program.
“The single federal loan program should be a student loan program, not a parent loan program,” Chingos said, arguing that “creditworthy” parents could get loans in the private market.
But Copeland-Morgan countered that the PLUS program is necessary because many low-income families may not have been able to save for college and cannot obtain private loans.
Chingos also called on Congress to eliminate the Public Service Loan Forgiveness Program, which forgives student loans of graduates who go into certain public service jobs, such as public schoolteachers or public health care providers, after they make 10 years of student loan repayments.
Chingos said the program will prove more costly than anticipated because 25 percent of all jobs are in the public sector.
U.S. Rep. Adriano Espaillat, D-N.Y., said eliminating Public Service Loan Forgiveness altogether is a “heavy-handed” approach because the program can be used to attract doctors, nurses and teachers to urban areas that need them the most.
“It’s a very important program, not only for those who will benefit, but for the communities across the country facing dramatic challenges,” Espaillat said.
Chingos countered that the program provides benefits based not on how much work one does but on how much they borrowed.
Witnesses and lawmakers also discussed the merits of moving toward a single repayment system to avoid confusion and restoring the year-round Pell Grant.
Soucier said the year-round Pell is a good way to keep students engaged during the summer. She called it a “huge benefit to the students and the schools” and said it would serve to improve completion rates.
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