Student Aid and Fiscal Responsibility Act

Jul 15, 2009 Issues: Education, Higher Education

(This post was updated on March 18, 2010 to reflect final changes made to SAFRA.)

Now more than ever, Americans need affordable, quality education opportunities to help make our economy strong and competitive again. President Obama has identified an opportunity to make historic investments in our economic future by improving early education opportunities and making college dramatically more affordable – and all at no cost to taxpayers.(See how SAFRA will benefit students living in each congressional district.)


The Student Aid and Fiscal Responsibility Act, which was included in the health care reconciliation bill that passed on March 21 2010 by a vote of 220-211 and signed into law on March 30, 2010, embraces the president’s challenge. It will help us reach his goal of producing the most college graduates by 2020 by making college accessible and transforming the way our student loan programs operate. It will reform early education opportunities to help put more children on the path to success. It will strengthen community colleges and to help build a highly-skilled workforce ready for the rigors of a global economy. And it will boost our future fiscal health by paying down the deficit. Specifically, the provisions will:

Invest the bill’s savings in making college affordable and helping more Americans graduate

  • Invests $36 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $5,975 by 2017. Starting in 2011, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index.  This includes an investment of $13.6 billion to fund a shortfall in the Pell Grant scholarship program due to increased demand for the scholarship as more Americans return to school and qualify for the Pell Grant.
  •  Invests $750 million to bolster college access and completion support for students. It will increase funding for the College Access Challenge Grant program, and will also fund innovative programs at states and institutions that focus on increasing financial literacy and helping retain and graduate students.
  • Makes federal loans more affordable for borrowers to repay by strengthening an Income-Based Repayment program that currently allows borrowers to cap their monthly federal student loan payments at just 15 percent of their discretionary income. These new provisions would lower this monthly cap to just 10 percent for new borrowers after 2015.
  •  Invests $2.55 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate.

Provide reliable, affordable, high-quality Federal student loans for all families

  • Converts all new federal student lending to the stable, effective and cost-efficient Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy.
  • Provides all federal student loan borrowers with upgraded, modern, state-of-the-art customer service. Rather than force private industry out of the system, the bill will forge a new public-private partnership that provides all borrowers with the highest-quality customer service when repaying their loans and maintains jobs. It will establish a competitive bidding process that allows the U.S. Department of Education to select lenders based on how well they serve borrowers, educate them financially, and prevent loan defaults. It will provide a role for non-profits to continue servicing student loans.

Prepare students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete

  • Invests $2 billion in a competitive grant program for community colleges to develop and improve educational or career training programs. 

Meet Pay-As-You-Go fiscally responsible principles and reduce the deficit   

  • Saves taxpayers $61 billion over the 10 years by switching to the cheaper Direct Loan program, according to the Congressional Budget Office. In addition to investing in college aid, these provisions will also reduce the deficit by $1 billion over five years