HUFFINGTON POST: Tom Harkin Wants To Take Money From College Students To Pay Reviled Loan Contractors

Career College Central Summary:

  • An outgoing Senate Democrat wants to take federal money from low-income college students to pay student loan contractors, whose tactics toward borrowers have been criticized by consumer advocates, federal regulators and the U.S. Department of the Treasury.
  • Sen. Tom Harkin (D-Iowa), chairman of the Senate education committee and the appropriations subcommittee in charge of federal education expenditures, has proposed taking $303 million from the Pell grant program to increase revenues for some of the nation’s biggest student loan specialists, according to a July 24 version of a 2015 fiscal year spending bill now being negotiated by congressional leaders.
  • Student advocates and congressional aides largely missed Harkin’s move last summer — partly because the full text of the spending bill wasn’t publicly released until six weeks after Harkin’s subcommittee approved it. They only noticed it in recent days as congressional negotiators work off his bill in the rush to finalize discussions on the federal government’s 2015 spending plans.
  • The government's spending authority expires Dec. 11. A government shutdown could follow unless Democrats and Republicans reach a deal. Congressional negotiators may eventually decide to spare the Pell program from cuts.
  • The Pell program is the nation’s largest source of grant aid for college students, according to the White House, and is meant for students from low- and middle-income households. Three of every four students who took out Pell grants during the 2012-13 award year had household incomes of $30,000 or less, according to the Department of Education. Nearly 8.9 million students are forecast to receive on average $3,826 from the program during the 2015 fiscal year, White House budget documents show. The neediest students can receive a maximum of $5,830.
  • The program has a surplus that the Congressional Budget Office in April predicted will evaporate and turn into a deficit by the 2017 fiscal year, which begins October 2016. Some analysts have said they fear the deficit will come sooner. Harkin wants to use that temporary pot of money to enable the Education Department to increase pay for student loan companies that collect borrowers’ monthly payments.
  • Student advocates said they’re outraged.
  • “I am appalled that Senator Harkin would put servicers — who profit by hundreds of millions of dollars a year — over the needs of low-income students,” said Alexandra Flores-Quilty, vice president of the United States Student Association. “Taking funding out of Pell and using it to pay private student loan servicers goes directly against the interests of students.”

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