Financial Aid Update: Things Are Looking Up

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While much of the hubbub in Washington in recent days has centered on the passage of the healthcare bill, students have yet another reason to celebrate: the passage of a bill set to thoroughly reform the student loan system. The Healthcare and Education Reconciliation Act will, in effect, remove the middleman from the student loan process. Basically, students will take out loans directly from the government, not large banks and lenders like Sallie Mae. It’s all in more detail here. Suffice it to say that President Obama is “pretty stoked.”*

*Not a direct quote.

What does this mean for Columbia students? Glad you asked! In an email sent yesterday, Dean of Financial Aid Daniel Barkowitz laid out the details:

This morning, President Obama signed a reconciliation bill that significantly reforms the processing of federal loans and grants for students. In light of this legislation, Columbia University will transition to the Federal Direct Student Loan Program beginning with the 2010-2011 academic year.

Like the existing Federal Family Education Loan Program (FFELP), the Direct Loan Program provides federally insured loans to students and their families. Rather than working with private lenders who process and disburse federal loans, students and their families will now receive federal loans directly from the U.S. Department of Education.

For the 2010-2011 academic year, all federal Stafford and PLUS loans will be processed through the Direct Loan Program of the U.S. Department of Education. This procedural shift will not affect borrowers’ eligibility, but the process will be different. Students and parents who have existing loans through FFELP will continue to work with private lenders for these existing loans. All future loans will be issued through the Direct Loan Program. Upon graduating, students may elect to consolidate their federal loans into one payment with the U.S. Department of Education.

We recognize there will be many questions regarding this transition. The University’s Student Financial Services website ( has a set of questions and answers that will be updated regularly. Federal student loan recipients will receive more detailed information via e-mail in the coming weeks. Please know that we will provide as many resources as possible to ensure that this transition occurs smoothly.


Daniel Barkowitz

Dean of Financial Aid

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  1. Expect hikes  

    The steam governor's been ripped off the funding engine, and we can expect tuition year-on-year to increase in excess of the costs of many other relatively unsubsidized services. As with monetary inflation - notice by the way, folks, that M3's not been published since 2006? - the first wave of recipients of this federal largesse will benefit the most, receiving easier money against roughly the same published costs.

    The availability of this subsidy money will prompt the business managers at schools on the receiving end of the paper pipe to hike their costs ad libitum, a perfectly rational response to the availability of looser credit. Later students will find themselves complaining about the inadequacy of this boon, and will cry, "Somebody's gotta do something about this!"

    And by that time, today's term-limited, Matt-Lesko-government-FREE!!!-money fascist sugar daddies will have been replaced by their "opponents" across the aisle, who will in turn propose another fix-on-the-previous-fix, tightening the radius of curvature of our fiscal death spiral... Weimar Republic, anybody?

    This is nothing more or less than a "Greater Fool" scheme. I sincerely encourage today's recipients to enjoy it while they can, because they're stuck with it, and the rational actors in them would be even greater fools not to avail themselves of the loot.

      • idiot  

        the point of government direct student loans is to eliminate the middleman. it's government money in the first place, it's just not ADMINISTERED through banks.

        • What money?  

          What is this "government money" of which you speak? There's no such thing. Anything the government dispenses as handouts has to start life as tax revenue before it can be handed out by Uncle Sugar. In plainer language more accessible to you: it's got to be stolen from the marks first, then handed back out to the same people or their children, who'll thank you gratefully for having given them back a slice of their own stolen money, after Uncle's skimmed his take. That's the essence of your "ADMINISTERED through banks" fiction, with the difference that in the past, the money was dispensed through a network of mob-approved loan sharklets.

          The original poster wasn't saying anything about different money being shelled out, he was talking about the same money handed out more honestly by the same mafia capo who'd been taking it all along. The previous system wasn't much better than its new bread 'n circuses replacement, but at least had the ameliorating characteristic of being distributed among private institutions who were closer to the customer.

          This having been asserted, expect even more fun: if you fall behind on loan payments, it'll no longer be Citibank or Sallie Mae pestering you, it'll be a government agent - possibly the IRS itself - threatening you with debtor's prison. Check back here in 10 years, and deny the New Normal.

    • ...  

      wait, let me get this straight. somehow a mere $425/yr increase in pell grants for poor students that will be phased in over the next 7 years is somehow "the steam governor being ripped off the funding engine?"

      do you know what a pell grant is? do you know that the income cap is $50k and the majority goes to families earning under $20k?

      you do realize that the number of recipients of pell grants at columbia is well south of 20% right? and you do realize that those at columbia who do receive pell grants receive way more in institutional aid, right?

      do you have any idea what you're talking about?

      • Read again  

        You seem to be making part of my own point for me: of course the supply of "free government money" being doled out to the grateful masses is in fact somewhat laughable. Sure, no dispute there at all. It's the fact that the mechanism of distribution, that "middleman" tier of the market the fans of today's change cast as villain, at least served as an imperfect market interface with private-entity people with whom one could deal. We've lost that, and given it over to un-fireable civil servants. Have you ever tried negotiating payment terms with the IRS?

        Does anyone after a bit of examination really think it's a grand thing that administration of student funds is being taken from financial institutions with at least non-zero accountability to customers, and given entirely over once and for all to the same warm, customer-responsive folks who run the USPS, immigration, the CIA, and the wonderful people of the TSA who exercise such sensitive and intelligent efficiency in their efforts to protect us?

        You ask, "you do realize that those at columbia who do receive pell grants receive way more in institutional aid, right?" I may be mistaken, but you're Columbia College, correct? Because what you say is certainly true of the College. It is, however, largely untrue of the 16 other colleges & schools subsumed by the University. It's also largely untrue of the myriad thousands of chartered colleges in the U.S. My remarks were stimulated by the same email you received, but my larger interest is in the larger economy outside Morningside Heights.

        • ...  

          ok, first off. you seem to have some sort of issue with the idea of federal grant aid. that's a whole discussion i can't be bothered to get into. but on that topic, i'll leave you with this: you are in the minority in your opinion, it's kinda batshit crazy.

          second off, your assertion that somehow the tens of billions of dollars the government is wasting by using the private lending industry as brokers for loans with fixed terms is somehow worth "better customer service" is kinda ridiculous. there really isn't a whole lot of customer service that goes into loans unless problems occur. if you had ever taken out a federal education loan, you'd understand that you don't even interact with the lender at application time... and do you know what the private lenders do when problems occur with these federal loans? they sell em right back to the DOE and move on. in the end, if/when these things go sour, it's a federal employee on the other end of the line anyway. so when you need your executive customer service on your federally backed and subsidized loan that has gone sour, the friendly face of your favorite banking industry logotype is nowhere to be found and you find yourself staring down the hard lines of a government issued 27b/6 anyway.

          of course, this whole scary forms and debtors prison fantasy is just that, fantasy. i know people who took out federal loans and fell on their faces right after college. funnily enough, their stafford and perkins loans rolled over to the DOE, consolidated and suspended payments for close to a year while my friend got back on her feet. ironically, it was sallie mae who turned out to be the real bitch.

          • Ad hominem sucks  

            "i’ll leave you with this: you are in the minority in your opinion, it’s kinda batshit crazy."

            Preceded by:

            "do you have any idea what you’re talking about?"

            Previously presaged by:


            What's with this presumption that the guy(s) on the "less government" side need to be pounded with the "and you're microcephalic" hammer in the process of trying to make your opposing point? How does this help your case?

          • ...  

            the OP(s) wrote in arrogant tone of condescension (blanket ad hominem?) and also demonstrated a stark ignorance of the topic at hand (it's pretty clear to anyone who has ever taken out a stafford or perkins loan that the author(s) above have never done so). sorry, but i find arrogance + ignorance to be a pretty offensive combination and i won't hesitate to pull out the "hammer" when faced with it.

          • OK, you concede  

            "arrogant tone of condescension" - even if true - does not entail "blanket ad hominem." Unable to argue your point - and insisting your interlocutor has no experience of the system in which he/she/it/zog seems to be intensely interested, is a sad rhetorical maneuver indicative of a bankrupt argument. Fare thee well with your eventual Econ/PoliSigh/GenderStud degree, and don't fall behind on your payments to the Federal Bursar, because the collection agency won't be your bank's Accounts Receivables department, it'll be the IRS.

  2. Wait  

    I didn't get this email. Who was supposed to receive this email?

  3. too bad  

    this doesn't really apply to many people because Fin Aid sucks. its great for the people who epicly need it, and fucks everyone else over.

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