Student Aid and Fiscal Responsibility Act

Student Aid and Fiscal Responsibility Act

The Student Aid and Fiscal Responsibility Act (SAFRA) of 2010 ensures that all federally funded student loans will be directed through the federal government’s Direct Loan Program (DLP,) saving taxpayers $61 billion and using that money to fund the rest of the bill.  It abolished the Federal Education Loan Program (FFELP)—which used publicly subsidized private loan companies to provide student loans.

SAFRA provided the Pell grant program with an infusion of $36 billion (over 10 years), increasing the maximum award to $5,550 in 2011.  SAFRA also ensures the program’s benefits will now grow with inflation every year, plus one percent.  SAFRA makes student loan interest rates variable, but caps interest rates at 6.8 percent to protect borrowers from unreasonably high rates.

SAFRA also increased funding for community colleges ($2 billion in available grants).

Cry Wolf Quotes

The President's plan, although touted as a means of promoting higher education, is not. The plan does not reduce the cost of student loans for a single student. Students and parents need to know that under this proposal, the government's profits on student loans borrowed by middle income students will be used to finance other student aid.

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The Consumer Bankers Association’s Director of Government Relations, Marcia Z. Sullivan. Consumer Bankers Association’s press release.

Legislation passed by the U.S. House of Representatives, however, would require all federal student loans to be originated by the federal government, jeopardizing hundreds of private sector jobs in Wilkes-Barre and hampering related economic development in the state. Sallie Mae currently contributes more than $40 million annually to the local economy and has contributed millions to local charities.

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Industry press release from the Pennsylvania branch of Sallie Mae.

Here is what they haven't told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education -- and to help your U.S. representative's reelection.

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Senator Lamar Alexander (R-TN) published this anti-SAFRA op-ed in The Washington Post.

This bill is a massive expansion of the Federal Government, pure and simple.

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Alexa Marrero, spokesperson for Representative John Kline (R-MN), the chairman of the House Education and Labor Committee. Time magazine.

Evidence