March 15, 2005

Smith Bill Streamlines Student Aid, Encourages Colleges to By-Pass the Middle Man

Washington, DC – Today, Senator Gordon Smith and Senator Edward Kennedy (D-MA) unveiled legislation to boost college scholarships at zero added cost. Smith’s Student Aid Reward (STAR) Act, encourages colleges, when choosing between direct lending and bank loans, to choose the less expensive option.

“Oregon students deserve the benefit of the most effective student loan program possible,” said Smith. “When universities choose direct loans they deliver far more of the taxpayer’s investment to students. This bill strongly encourages and rewards that choice.”

Student loans are issued by the U.S. Treasury to either private lending companies or directly to universities. The STAR Act encourages the less expensive option of direct university loans by rewarding additional student aid scholarship money to those schools that choose the more valuable option.

Seeing the inherent benefits to the STAR Act, students and education leaders joined the lawmakers to support the legislation, and to kick off a national campaign on college campuses to promote the bill’s passage. Data from the Department of Education released today, shows that taxpayers are paying private lenders billions of dollars that could be used to send more American students to college. Current law dictates that private lenders receive a guaranteed 9.5% rate of return on student aid loans.

"As a direct lending institution, the University of Oregon strongly supports efforts to make financial aid available to students in the most cost effective and efficient way possible," said University of Oregon President Dave Frohnmayer. "A college education means a chance for a better life, but many cannot afford it. I applaud Senator Smith's efforts to strengthen direct lending programs and student accessibility to higher education."

“OSU supports Sen. Smith in his efforts to promote efficiencies in federal student loan programs. The STAR Act is an important step in providing institutions choice, while increasing access to deserving students,” said Kate Peterson, Director of Financial Aid at Oregon State University.

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