The US are going through one of the most refractory policy fights of the year. The bone of contention continues to be the budget proposal for 2010 with regard to education, unveiled by Barack Obama at the end of February. In brief, the proposal outlined a complete overhaul of federal financial aid programmes for students, i.e. ending years of federal support for banks and other lenders (private companies). Instead of subsidising the lenders, the administration would lend the money directly to students. The change would help, in the President’s words, save up to USD 94 billion over the next decade. The extra money would be used to increase the grants for the neediest students (the Pell Grants). In addition, the spending on the Pell Grants would be made mandatory, therefore limiting the congressional control over their fate (until now, the American Congress decided on the amounts for the grants, on an annual basis). All the measures go in line with the education objectives set as soon as Barack Obama came to the White House (see ACA Newsletter – Education Europe, November 2008).

Unsurprisingly, the proposal sparked controversy, given the many interests at stake. For many, especially student organisations, this change would be a dream come true. For others, this is without a doubt their biggest nightmare. The private student lending industry rallied against the proposal, trying to save a programme that brought them high profits with very little risks. Republicans stand also against, accusing the President of vastly expanding state control over education. The Democrat camp is divided, as lawmakers from districts where lenders are big employers already became reluctant to supporting such a measure.

After a recent hearing on the future of the student loans programs in the House of Representatives, it seems that the solution might be a compromise. Still there is hope for the proposal to go through unaltered.

US Department of Education