Prosper Act to potentially merge student aid programs

By Michael Urbanec

DeKALB — Revisions to the way financial aid functions for borrowers has been an ongoing discussion in Washington D.C. with the Education and Workforce Committee putting forth the Prosper Act.

The Prosper Act is a reauthorization and update of the Higher Education Act of 1965, which has been approved eight times since its inception. The last reauthorization occurred in 2008.

“I am hopeful that this will be one of the most substantial reauthorizations that we have had in the history of the Higher Education Act,” said Rebecca Babel, Financial Aid and Scholarship Office director.

The Higher Education Act allowed for more support for universities from the government, created several scholarships and grants and introduced different low-interest student loan programs.

Currently, several different types of loans, grants and work-study programs exist to financially assist students pursuing higher education. Subsidized loans are granted based on need; these loans do not accrue interest while students are still in school. An unsubsidized loan does accrue interest from the moment it is dispersed.

Existing forms of aid will merge together into a model referred to as One Grant, One Loan, according to section 461 of the Prosper Act.

Under this model, subsidized loans will be eliminated, and unsubsidized loans will be the only option.

“I would prefer they keep the subsidized loans,” said Eric Monatelli, junior elementary education major. “We don’t need students paying this enormous amount of money once they’re done with school.”

Proposals to change unsubsidized loans include an interest cap, meaning once a certain amount of interest is accrued, no more will be added to the loan. The interest cap has not yet been decided, as the act is still in the House of Representatives.

Another change the Prosper Act can potentially bring is an increase in the amount of money a first-year student can borrow in one loan from $5,500 to $7,500 per semester. Sophomores’ limit will increase to $8,500, and juniors and seniors will be allowed to borrow $9,500.

Babel said the draft of the Prosper Act making its way through the House is not the final draft of the bill; it still needs to be revised before it can be voted on, and the Senate version of the bill has yet to be made public.

What is known is certain low-funded programs, like the low-interest, need-based Perkins Loan awarded to undergraduate and graduate students, will be eliminated and merged into the new One Loan format.

Babel said the Perkins Loan was available to less than 1 percent of students.

As the Prosper Act is still making its way through the House and is beginning its journey through the Senate, it is unknown when its impact will be felt.

Babel said the 2021-22 academic year is the most practical year for these new regulations to be put into place because the processing cycle for the 2018-19 school year has already begun, and the Prosper Act still requires significant rewriting before it can become a regulation.

There is also a plan in place to implement a FAFSA Mobile app to further simplify the process of applying for financial aid, according to a Jan. 17 bill summary published by the Education and Workforce Committee.

“The Department of Education, knowing that a reauthorization was pending for the last three years, has really not done a lot of innovative things because they were waiting to know the scope of what they needed to accomplish,” Babel said. “They’re making sure they aren’t building something that will just get re-done.”