That is meant to address the “low take-up rate” of federal government assistance available to families who are put off by the complexity of filling out the Free Application for Federal Student Aid (FAFSA) which has 127 questions.
While families would surely welcome simplification of the application, this might be resisted by states who rely on the detailed responses to determine eligibility for state-level support, explains Tom Parker of the Institute of Higher Education Policy (IHEP).
Democratic Swollen Wish List
Such issues are critical because only a tiny fraction of 17 million college students are from families that can afford to finance their education themselves and most have to rely on some federal support.
Uncle Sam’s help comes in the form of direct and indirect loan programs that guarantee private lenders. Only 20 percent of Washington’s aid comes in the form of grants for the neediest students.
Both Democratic candidates are in favor of significantly expanding Pell grants to help catch up with their eroded purchasing power, but desired indexing (to inflation) would be costly and politically tricky.
So is the idea of making tax credits refundable, which would put this key financing assistance within reach of lower-income families – those earning less than $60,000.
Whoever assumes the presidency next January will find a very challenging budget environment that will make any increased support for higher education politically difficult, said Travis Reindl, of Making Opportunity Affordable, an education advocacy group.
That is perhaps particularly true for the Democrats because education would be pitted against other priorities, such as universal health care.
“There will have to be day of reckoning, ” said Reindl. “There are a lot of mouths at the table to feed here and not a lot of extra scraps to go around”
Public vs. Private Lending
Another controversy is the Democrats’ effort to reduce the government-guaranteed yields earned by private lenders.
Those generous incentives to lend have long drawn criticisms from Democrats who have succeeded in slashing the allowable interest rates in the last two years.
The most recent cut, last fall, trimmed 55 basis points, to leave yields at 2.39 percent above 90-day commercial paper rates, according to Harrison Wadsworth, a representative of the Consumer Bankers Association.