Recommendations for Student Loan Reform cause mixed emotions on campus

Jeremy Thomas

National Association of Student Financial Aid Administrators (NASFAA) offered several policy considerations in a report released Wednesday that received mixed reviews from the UT community.

The report does not make recommendations, but rather puts forward broad policy considerations to generate discussion on key policy issues facing students.

One policy in the report considered federal government use of a “Student Loan Eligibility Index,” which would introduce minimal financial requirements that students must meet before receiving federal loans.

Director of the Office of Student Financial Aid Tom Melecki said the policy has the potential to benefit and harm the students depending on how it is applied and designed.

“We might actually close the door to college opportunity to some students who could still benefit because of the way they scored on their SAT/ACT test or GPA made them fall into some category where we’re making assumptions about them that we shouldn’t make because we don’t really know them that well,” Melecki said. “It could also protect students from taking out loans they should not take on. It depends on how it gets applied and designed.”

If students did not qualify under the “Student Loan Eligibility Index,” they would still be able to receive Pell Grants and other institutional aid, according to the report. Studio art junior Sian Paulin said she thinks the proposed system would be unfair even with the possibility of Pell Grant eligibility.

“Pell grants don’t cover everything,” Paulin said. “Even if they do get Pell grants but they still have more expenses to cover and have no other money to pay for it, you need loan money. If your GPA isn’t high enough then they have to pay out of their own pocket or take out a loan from a private bank with higher interest rates.”

Another policy consideration suggested student loan repayments through Income-Based Repayment plans for all borrowers. Melecki said the plan would tie the amount paid to the borrower’s income, where the amount due in a year would depend on income earned that year.

“The Income-Based Repayment makes a lot of sense to me [especially for] those early years when you’re getting out of school,” said Melecki. “When you can’t afford to pay a lot, it’ll suppress your payments. In addition you could opt out of the income based repayment if you wanted to pay off the loan quicker or endured a financial hardship.”

Journalism junior Rebecca Salazar said evaluating the repayment plan is a tough issue.

“I feel like on paper it sounds fair because if you make more you can pay more,” she said, “but then I don’t want to punish the people that make more to pay more.”

The report also considered an option for students to be told in advance whether they are Pell eligible and guarantee an award amount as early as students’ freshman year in high school. Other policies in the report included Pell Grant incentives based on credit hours for those who already qualified for the grant and the idea to allow financial aid offices to limit the amount some students may borrow.

“I think everything in here is worth exploring and thinking about,” said Melecki. “That does not mean that I think we should adopt everything in here. They make some really good points.”

Published on February 18, 2013 as "NASFAA addresses financial aid policy".