After President Barack Obama’s State of the Union address, in which he called for increased funds for higher education spending in a time of budget freezes, proponents of education on the Hill have begun work toward implementing a more streamlined student loan framework and increasing the cap for Pell Grant awards. Georgetown’s Office of Student Financial Services is readying itself for the passing of the Student Aid and Fiscal Responsibiliy Act, the biggest effect of which would be the switch to the direct loan program.

Obama has launched the initiatives after pitching a budget of $49.7 billion for the Department of Education, a $3.5 billion increase from the fiscal year 2009.

“The budget also includes $173 billion in loans, grants, tax credits and work-study programs to help students go to college,” a press release by the U.S. Department of Education said.

The House of Representatives passed the Student Aid and Fiscal Responsibiliy Act, Sept.17, 2009. The bill converts all federal student lending to the direct loan program, which backers purport as more stable, cost-efficient and effective. If the bill passes through the Senate, it will take effect on July 1, 2010.

“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,” according to the bill’s Web site.

This change from the Federal Family Education Loan program to the direct loan program would save the government over $87 billion, as the switch means the federal government would not have to back up student loans to banks through existing student lending programs like the FFEL, according to Arne Duncan, the secretary of education. The savings would then be reinvested in the Department of Education.

The responsibilities of the FFEL, a program that includes the Stafford Loans, Unsubsidized Stafford Loans, Federal PLUS Loans and Federal Consolidation Loans, range from paying for students’ interest rates to producing a guarantee that the program will pay if a student defaults on a loan.

“Last year, the Office of Student Financial Services acted to be ready for a potential transfer from the FFEL to the Direct Lending program,” Patricia McWade, Georgetown’s dean of student financial services, said of the possible change. “We completed all of the necessary paperwork and documentation with the Department of Education and, in fact, have done a small volume of direct lending already. If the Congress is going to make this change, timing is very important.”

Wade said that the university has begun the process to prepare for those who will require financial aid in the incoming class of 2014.

“Our goal is to make sure that Georgetown students receive the grant, loan and work assistance they need, and the timing of a complete transition from FFEL to direct lending can add to the complexity of getting that done so that our students receive their loan proceeds in a timely fashion,” McWade said.

Sen. Tom Harkin (D-Iowa), the chairman of the Senate Health, Education, Labor and Pensions Committee, recently said in an education meeting on Feb.1 that he hopes to pass the bill by this time next month.

“It is my suspicion [that the bill] will be [passed],” Scott Fleming, associate vice president for federal relations at Georgetown and a supporter of the SAFRA said. “Harkin is intent on making it happen at this point and as [he is] the chairman of the committee, I’ll take him by his word.”

The U.S. Department of Education’s Fiscal Year Summary of 2011 also lays out the president’s plan to increase the maximum Pell Grant award to $5,710 from the previous maximum amount of $5,550.

“We are not looking to increase the national debt or tax burden – the funding is coming from stopping subsidies to banks. This will give $87 billion more into students. It’s a matter of prioritization,” Duncan said of the Pell Grants.

Pell Grants, according to the U.S. Department of Education Web site, are need-based grants that are awarded to low-income students in order to help them gain access to any of roughly 5,400 participating institutions of secondary education.

According to Georgetown’s Office of Student Financial Services, 823 Georgetown students, who make up over 11 percent of the student population, currently receive Pell Grants, with 286 of those students receiving the maximum Pell Grant amount.

In the past, Pell Grant funding has been reviewed every year for the budget by Congress, as it is in the discretionary faction of the budget. Obama’s plan, however, calls for moving the money to the mandatory side of the budget, so it does not require congressional review each year. This move would aim to stabilize the funding, which is in flux once congressional review period begins each year and to give more control to the president in determining the amount of funding.

“This bill features historic increases for education across the board. The president is insisting on education. This is the key to long-term economic prosperity,” Duncan said. “This is the biggest investment in higher education since the G.I. Bill. As a country, from a policy standpoint, there is nothing better to do.”