Administrator: Obama’s financial aid plans not likely to affect campus

Although the amount of financial aid students receive probably won’t change under the Obama administration, the application process they go through might, the director of scholarships and financial aid said.

Mike Scott, director of scholarships and financial aid, said he’s for President-elect Barack Obama’s plans to eliminate the FAFSA and replace it with a checkbox on families’ tax forms, although there are still some procedural details that need to be worked out.

The biggest problem would be that schools might not have the most up-to-date information about students’ parents’ income, Scott said.

When students fill out their FAFSA for the 2009-10 school year in June 2009, the information they provide will be based on their parents’ earnings during the year 2008. However, the Internal Revenue Service wouldn’t have processed all the 2008 tax returns yet. Therefore, if the school depended directly on the IRS for this information, as it would under Obama’s plan, it would have to base its financial aid decisions on tax information from 2007, Scott said.

“The real knowledgeable people in this say that is not an issue that can’t be worked through, so I trust them,” Scott said.

Scott is less enthusiastic about Obama’s plans to cut subsidies to private lenders and push student borrowing into a direct lending program, however, under a direct lending program, students would borrow money for higher education directly from the federal government.

Although a direct lending program would lighten the workload of the people in the financial aid office, private lenders provide more benefits for students, Scott said.

“If you take out a Stafford loan at Wells Fargo or at Chase, it’s the exact same loan,” Scott said. “So the way they compete is primarily through customer service. We’re just afraid when you’re dealing with one entity, with the feds, what’s the incentive to make sure everything’s going well?”

Most TCU students aren’t eligible to receive money from the Federal Pell Grant Program because their families make too much money, Scott said.

As a result, Scott said, a relatively small number of TCU students benefited when Congress cut subsidies to private lenders to make more money available for the Pell Grant program in 2007.

“Up until this school year, banks competed with each other to get your student loan business by offering borrower benefits or repayment incentives,” he said. “When Congress cut the subsidies to the lenders, they could no longer offer those repayment incentives. So those costs just got passed onto the students.”

TCU students are more likely to benefit from the $4,000 tax credit Obama has proposed for students who complete 100 hours of community service, Scott said.

“Tax credits like that tend to help middle-income families more,” Scott said. “If you’re in the really high-income brackets, you don’t qualify for it, and if you’re in the really low-income brackets, you’re probably not paying any taxes anyway, so that tax credit doesn’t make a lot of difference.”

The only problem with a tax credit, Scott said, is there’s no way to guarantee that families will spend the money on education.

“Basically what they’re saying is, by reducing the amount of taxes you’ll have to pay, you can save some of that money to pay for college,” he said. “Well, the question is, is that really what you’re going to do with it? If your paycheck every month increases by $300, are you going to save $300 a month to go to college next year, or is the average family just going to spend that?”

Obama has also pledged to support programs that provide academic services for college students from low-income families such as TRIO and GEAR UP.

J. Steven Hodnett, the director of TCU TRIO programs, said he hopes Obama’s support will translate into more money.

“We have been in a funding situation that has been basically level-funded for the past five years, so I’m hoping with his support of TRIO and GEAR UP and similar programs that the funding level would increase somewhat down the road,” Hodnett said. “If we could get more funding to keep up with inflationary increases, then hopefully the funding increase would allow us to offer our services to more students here on our campus. We’re only working with about 10 percent of the students we have enrolled here that qualify for our program.”

Regardless of Obama’s plans for higher education, political science professor Jim Riddlesperger said the economy will be Obama’s number one priority when he takes office in January.

“I think initially at least, what the approach for the Obama administration will be, as I think would be the case for John McCain if he were becoming president, will be a delay in these kinds of plans,” Riddlesperger said. “It’s going to be a very fluid process over the next three to five months as the parameters of the first Obama budget are put together. He has said he wants to use that scalpel to cut selectively from federal spending, but whether that scalpel will include some kind of higher educational loans or scholarships, I just simply don’t know.”

Ultimately, Riddlesperger said the best way to help higher education is to fix the economy.

“The hipbone is connected to the knee bone, which is connected to the shinbone, which is connected to the anklebone,” Riddlesperger said. “All of these things impact everything else. As long as we have an uncertain economy, that’s a threat to higher education as it is to other aspects of the economy. Probably the best way for higher education to benefit is for the economy to be healthy again.”