What’s Going on with SAFRA?

Congress has been considering the Student Aid and Fiscal Responsibility Act (SAFRA) since July 2009. Over that time, Democrats have watched the bill go from low hanging fruit – previous estimates of more than $80 billion in savings over 10 years were difficult to say no to – to a near political casualty. Complaints from Republicans about government “takeovers” and from loan companies about huge job losses, as well as changes in savings estimates, have forced supporters to dramatically lessen the bill’s scope and cut out some key programs. But not all is lost in SAFRA. In addition to switching all federal student loans from the highly subsidized Federal Family Education Loan Program (FFELP) to the less expensive direct lending program, the most recent version of the bill does boost spending for Pell Grants, and includes funds for college access and completion, and community colleges.

According to a fact sheet released by the House Education and Labor committee, the current version of SAFRA will invest $36 billion over 10 years in the Pell Grant program. This $36 billion would come from $61 billion in savings afforded by the switch from FFELP to direct lending and would allow maximum Pell Grants to reach $5,975 by 2017 (assuming Congressional appropriators live up to their end of the bargain). Additionally, Pell Grants awarded in fiscal year 2013 and after will be tied to the Consumer Price Index to keep pace with inflation.

The most recent bill also includes $750 million for the College Access Challenge Grant program. This program provides funding to states and other agencies to promote college going and provide support services to potential and current college students. This pales in comparison to the $3 billion included for these purposes in the previous version of the bill passed by the House. 

Finally, the bill provides $2 billion in competitive grants for community colleges, $5 billion less than allocated in the previous version of the House bill. These funds would support activities in community colleges to improve educational and career training programs. However, unlike the original SAFRA bill, this $2 billion will be funneled through the Department of Labor’s Trade Adjustment Assistance program. This fund is of particular interest to the Obama Administration because the president recently called for community colleges to graduate 5 million additional students by 2020 to help bolster the American workforce. Given the troubled status of most state community college budgets, these additional funds could determine whether that goal is met.

However, a couple programs are obviously missing from the most recent version of the House bill. Most notable is the Early Learning Challenge Fund, an $8 billion competitive grant program meant to improve quality of and access to early learning programs in states. The absence of this program in the bill could mean a blow to the Obama Administration’s early education agenda, which was largely touted during the campaign.

Additionally, the most recent version of SAFRA does not include any funds for renovation, repair, and modernization of school facilities. The previous version of the bill provided $2.5 billion for community college facilities and $4.1 billion for K-12 school facilities. This funding would have represented the largest direct federal involvement in school facilities at the higher education or K-12 level. Previous programs have either targeted select student groups or taken the form of tax credit bonds, rather than direct funding.

Overall, the Congressional Budget Office estimates that the new SAFRA bill will result in a net $19.4 billion in savings over the next ten years. This includes savings as a result of switching from FFELP to direct lending and any expenditures made through the programs described above. Now it’s up to the House to work out its differences over this version of the bill and pass it on to the Senate. We’ll keep you updated as the process progresses.