Health care reform became law this week, and young people around the country have many reasons to celebrate. Several of the provisions in the health care bill will directly improve the lives of young people, one of the most uninsured groups in the country. Some say that a third of those born between 1980 and 1990 are uninsured–and ten million people born in the so-called “Millennial” generation stand to gain insurance because of the health care bill.
But that’s not all. The Student Aid and Financial Responsibility Act, commonly known as SAFRA, was also passed with health care reform. The United States Student Association called it “the most sweeping overhaul of the student aid system in American history.”
SAFRA eliminated over $60 billion in government subsidies for private student loan companies who provided federal student loans. Instead, $36 billion of that is going directly to save the Pell Grants program, which supports low-income students but currently faces an $18 billion budget shortfall. SAFRA will also allow students to borrow money directly from the Department of Education with a new Direct Loan Program that forty percent of colleges have already adopted.
SAFRA will boost the maximum grant award to $5,550 and include protections that it cannot be decreased in future years. When Pell Grants were first instituted, the money used to cover about three quarters of an undergrad education, but these days Pell Grants only cover about a third of college costs.
And it’s students of color who depend most on Pell Grants. While Pell Grant recipients overall fall into a fairly older, white and female demographic, only 21 percent of white college students in this country qualify for Pell Grants. According to the National Postsecondary Student Aid Survey conducted by the National Center for Education Statistics, forty-six percent of Black students depend on Pell Grants, 39 percent of Latino students depend on Pell Grants, and 22 percent of Asian American students qualify for Pell Grants. Students of color often have disproportionate need, and therefore are more likely to qualify for the maximum award.
If SAFRA hadn’t passed, the 8 million undergrads who depend on Pell Grants would have seen their federal grants cut by 60 percent.
Student aid is essential for students of color. Studies have shown that Blacks and Latinos are especially debt-averse, who will not enter into student loans to pay for school because they are either unwilling or unable to take on more debt. Instead, students of color take time off from school, alternating semesters in school with months away from campus so they can work and save enough to re-register. And students of color are more likely to drop out of school because of the unbearably high costs of college. Sixty-nine percent of Black students who don’t graduate say they left because of high student loan debt, compared to 43 percent of white students.
And even though 86 percent of Latinos say getting a college education is a high priority for them, 49 percent of Latino students delay or don’t attend because of the high cost of student loans. Latino students are more likely to attend a cheaper school, choosing a community college over a state school, or a state university over a private school, for instance, because of the high costs. The findings were ironically released by a study conducted by Sallie Mae.
But SAFRA goes a long way toward providing help for students of color, even if it does nothing to deal with the skyrocketing costs of tuition. And if this isn’t enough, SAFRA also includes a provision that sets aside $2.2 billion for HBCU’s, Latino-serving schools and tribal colleges.
While SAFRA is a considerable victory for low-income students and students of color, student loan companies will continue to be intimately involved in the student lending industry. Both Sallie Mae and NelNet won a contract with the federal government that will allow them to service federal loans in the new Direct Loan program, and is supposed to net them $550 million over the next two years.
But SAFRA was necessary for all students who depend on student loans to pay for college. There are plenty of numbers here, sure, and ultimately not one defining statistic that proves it, but SAFRA is definitely a win for students of color.
Past Coverage: [Democrats Who Oppose Student Loan Reform Love Banks More Than They Care About Students] [Community College Funds, Pell Grants Getting Cut In Last Days of Student Loan Reform Fight] [The Final Tally On Student Aid Reform Marks A Win for Students] [College Students Need Government Aid More Than Sallie Mae]