The US House of Representatives yesterday approved an overhaul and expansion of the federal student aid program by a 253-171 vote, and included an amendment that may keep non-profit lenders like Vermont Student Assistance Corporation in business.
At least for now.
As I described in a recent Seven Days story ("On Borrowed Time?"), the future of VSAC as a lender remains in doubt, as Congress debates doing away with most private lenders and having students and parents borrow directly from the feds — bypassing groups like VSAC.
VSAC officials say that endangers a myriad of services it provides to Vermonters such as career counseling, lending advice and college preparedness. Those services are paid for through profits made from the loan program, not from direct state aid, VSAC officials note.
The Student Aid and Fiscal Responsibility Act (H.R. 3221) increases Pell Grants to $6,900 by 2019 from $5,350 today, expands the Perkins low-cost loan program to every U.S. college and simplifies the process of applying for student financial aid, and also sets aside funding to improve community colleges and early education opportunities.
Vermont students will receive $60 million more in Pell Grants, and an additional 2,985 students will be eligible over the next 10 years, according to figures released by US Rep. Peter Welch (D-VT).
Welch successfully amended the bill Thursday morning to ensure that non-profit lenders like VSAC can continue providing ancillary services such as college counseling, career placement, financial aid and financial literacy. It also ensures that borrower services – for example, delinquency prevention and default aversion – are allowed uses of the new State Innovation Completion Grants.
"I am pleased that my amendment will help VSAC continue its critical outreach services, which have helped so many Vermonters take advantage of higher education and the opportunities that come with it," said Welch in a statement.
How VSAC would be paid to provide those services is not yet clear, said Scott Giles, VSAC’s vice president for policy, research and planning. Funding would come from the US Department of Education.
The bill also allows non-profit organizations that act as the primary lenders in small states like Vermont to receive money to service existing loans. But, the feds will pay $2.11 per account per month for up to 100,000 accounts. VSAC has roughly 115,000 active accounts, said Giles.
Even with Welch's amendment, it's likely that VSAC — which currently employs roughly 350 people — could be a dramatically smaller company within a few years.
Giles said VSAC and other non-profit lenders will now shift their focus to the Senate in hopes of seeking further changes to proposed legislation. The goal is to secure funding to continue providing key outreach services, as well as allowing non-profit lenders in small states to continue to participate in the federal direct loan program.
In addition to a $40 billion increase in Pell Grants and $3 billion for innovative college access and completion programs, the legislation also creates a new Early Learning Challenge Fund to encourage innovative, high-quality instruction. Vermont will receive $750,000 a year for the next five years in college access grants and $9 million in early education facility improvements.
The bill creates a new competitive grant program for community colleges to improve instruction, work with local employers and improve student support services — and will provide $3 million to Vermont’s community colleges to renovate and repair their campuses.
Illustration by Sue Norton.