President Obama’s $787 billion American Recovery and Reinvestment Act and his 10-year budget outline have a potentially high impact on higher education. First, the Administration has proposed a major change in the $85 billion-a-year student loan industry, with plans to designate the government as the sole provider of federal student loans, ending the participation of private lenders, such as Sallie Mae, whose stock price fell 31% on February 26 in response to the news.
The proposal, included in the February 26 budget outline, would end government-guaranteed loans to students by banks and other private lenders–lending that has totaled $56.7 billion in the current school year. The Administration said the shift, which would result in all federal loans coming directly through the government, would save $4 billion annually and $47.5 billion over the next decade, if approved by Congress.
“President Obama’s economic recovery plan is a victory for college students and their families,” said U.S. Rep. George Miller (D-California), the chairman of the House Education and Labor Committee, in a note on his Web site. “A sustainable economic recovery depends heavily on guaranteeing that our students can continue to have access to an affordable college education.”
Also in the proposed budget, the federal Pell Grant program would be adjusted to inflation for the first time since the program began.
The stimulus bill increases the Pell Grant scholarship by an additional $500/year, from the current maximum grant amount of $4,730, to $5,350 as of July 1, 2009. In 2010, the maximum grant amount will rise to $5,550.