The Student Aid & Fiscal Responsibilty Act
President Obama signed the Student Aid and Fiscal Responsibility Act (SAFRA) into law in March 2010, expanding and strengthening the Pell Grant program, a cornerstone of federal student aid. SAFRA also ended government subsidies to private banks offering student loans, eliminating unnecessary payments to banks and making loans cheaper and more accessible to students.
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Pell Grant Expansion
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Students receive Pell Grants by filling out the Free Application for Federal Student Aid (FAFSA) and being judged financially needy by the U.S. Department of Education. The Department of Education figures financial need by calculating a student's expected family contribution (EFC). SAFRA increased the EFC limit from $4,617 to $5,273, opening the Pell Grant program to tens of thousands of low-income students.
Pell Grant Increases
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SAFRA increased the maximum Pell Grant award to $5,350 in 2010 and $5,550 in 2011. SAFRA also allocated funds to allow for the thousands of extra students eligible for the program due to rising poverty rates resulting from the 2008 financial crisis. Beginning in the 2013-2014 academic year, Pell Grant amounts will increase annually by the inflation rate plus one percent.
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Student Loans
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Prior to SAFRA, the government paid out millions of dollars annually to private lenders that offered low-rate loans to students. However, through the Perkins, Stafford and PLUS loan programs, the federal government has been lending to students at low interest rates for decades. SAFRA eliminated the unnecessary subsidies to private lenders and continues to offer loans to hundreds of thousands of students each year.
Controversy
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SAFRA raised some controversy, largely among conservatives. First, many politicians and commentators disagreed with expanding federal aid to students, casting it as unnecessary spending. Secondly, many commentators alleged that SAFRA nationalized student loans. While spending debates often center on ideological positions--liberals think that the government should use tax money to help those in need, while conservatives believe that government should be limited to providing public goods such as roads and defense--the nationalization charge was false. Private lenders make loans to students in the amount of millions of dollars every year, as does the government; SAFRA simply eliminated the overlap between the two types of loans, saving the government money in the process.
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