As student loan debt continues to spiral out of control, a new proposal may make the situation even worse for struggling college students.
Every year, one-third of college students are awarded grants that give them the chance to earn their degrees. This is made possible by the Federal Pell Grant Program, a need-based system that provides funding to low- and middle-income students. This program is crucial for giving hardworking young people the ability to pursue higher education and follow their career paths, and it strengthens our nation’s commitment to making education a priority.
Unfortunately, under proposals by Democratic Sen.Tom Harkin, Congress could take more than $300 million from the program’s surplus and use it to increase the revenue of student loan companies. Astonishingly, this bill is meant to encourage companies to stop mistreating their student borrowers.
Instead of protecting the financial security of the Pell Grant Program, the U.S. Department of Education will give student loan companies millions of extra dollars as an incentive to help borrowers manage their debts. In other words, they are getting paid more money to simply do their jobs and not take advantage of their customers.
It is inexcusable to take money set aside for hopeful college students and offer it to student loan companies that have a history of cheating the system and unethically raising prices. Student advocates, consumer groups and colleges across the country have consistently complained about the way these companies intentionally mislead borrowers for the sake of profit.
Navient, one of the corporations that will receive higher payments from the proposal, recently paid a massive federal fine for allegedly charging tens of thousands of active-duty troops unfair late fees. According to the Huffington Post, 93 percent of the troops “paid much more than they should have.”
If the current student loan contractors cannot be trusted to honor legal and ethical obligations, in what universe do they deserve increased profits from the government?
As Sen. Elizabeth Warren explained during a September hearing: “I do not understand a basic renegotiation that says you can continue breaking the law, but we’re going to pay you more money for doing it.”
With college tuition rising faster than the rate of inflation, the U.S. Department of Education has a responsibility to serve the best interests of students and help them overcome these increasingly difficult obstacles. According to the Project on Student Debt, nearly 70 percent of graduating seniors had loans to repay. The loans averaged an astounding $29,000 per student last year. Thankfully, the Pell Grant Program helps keep the cost of these loans bearable. Without the program, millions of more students would be facing massive amounts of debt.
The Congressional Budget Office predicts that the Pell Grant Program’s surplus will turn into a deficit as soon as 2017. Lawmakers should do everything they can to support this much-needed program, which launches so many students into becoming promising young professionals. Pell Grant money needs to be saved for the millions of college students who need it, not placed in the hands of corporations that thrive off of student loan debt in the first place.
Moriah Camenker is a UF public relations senior. Her columns usually appear on Tuesdays.
[The views expressed here are not necessarily those of the Alligator.]
[A version of this story ran on page 6 on 12/10/2014]
