NEW YORK (CUNA — 3/23/10)–A student loan bill passed with the health care reform bill by the House Sunday won’t affect private student loan providers overall, says a company that offers private student loan programs.
“The bill overall doesn’t affect private student lending, and even if it does, it helps the borrower, so it is a positive for the industry,” said Chirag Chaman, chief operating officer of Fynanz, a New York, N.Y.-based provider of custom private student loans. Fynanz has a new alliance with CUNA Strategic Services to help credit unions in the private student loan market. It has 23 credit unions on board and 16 to be implemented in the next nine months, he said.
“If [the bill] helps the students, it helps the customers of the credit union, and by helping them, it helps the credit union” meet members’ needs, he told News Now.
The bill revamps the federal student loan programs and eliminates fees paid to private banks to act as intermediaries in student lending. Instead, the government will expand a direct lending program and use the $61 billion that taxpayers would save over 10 years to increase Pell grants for students (The New York Times March 21).
The bill sets automatic annual increases in the maximum Pell grant, scheduled to increase to $5,975 by 2017 from $5,350 this year. It also includes $13.5 billion to cover a shortfall caused by a steep increase in the numbers of students enrolling in college and seeking financial aid during the recession, said the Times.
Chaman noted there are few changes from earlier versions of the bill. “There’s nothing thrown in that’s new,” he told News Now. The Pell changes will provide aid, and “Need-based aid for students is important. The funds hadn’t been growing the past few years and [the increases] were needed,” said Chaman.
He noted that the average student takes out a private student loan as a last resort. “They will take the federal loan aid, state grants, scholarships first. A private student loan is the last thing they should look at,” he added.
Private lending can still be among the options schools can present to students with their information, although schools cannot recommend one over the other. “And the bill has no extra regulatory burden other than what’s already come down the pike” when Congress introduced Title X changes in loan forms, he said.