One Step Closer on Student Loan Reform
Last night, the U.S. House of Representatives voted 219 to 212 to pass a bill that would make significant changes to the country’s health care system. The legislation represents the biggest victory to date in a process that’s been ongoing since 1993. Later this week, the Senate is expected to have another opportunity to end a policy process that also started that same year: federal student loan reform.
The same year that President Bill Clinton first began working on health care reform, Congress created the Direct Loan Program—an initiative that allowed the Department of Education to use U.S. Treasury funds to issue student loans directly to individuals instead of the existing and costlier model of guaranteeing and providing subsidies for identical loans issued by banks.
In September, the House passed the Student Aid and Fiscal Responsibility Act (SAFRA) a bill that ended the bank-based system for good. Last night, it voted to end those payments again by passing the Reconciliation Act of 2010 (PDF). In
Since the creation of the concept of a medical residency in the early 1900’s, hospitals faced challenges allocating their seats efficiently. In a never-ending race to sign residents before peer hospitals could beat them to it, residency programs began issuing offers to candidates earlier and earlier to the extent that by 1944 some students were applying in their sophomore year. Almost all the spots were filled by juniors, two full years in advance of actually beginning the residency program. Worse, these students had little incentive to work hard in their last two years of school, and hospitals were losing out from this competition because they were competing over prized students and were losing two years of potential academic records to assess candidates.
In 1945, schools decided to band together and agreed not to release student records until their senior year. This alleviated the problem of early placement offers, but created a new one. Some students received offers from their lower choices but were informed they were on waiting lists at their more preferred options. Imagine the student’s displeasure when they were forced into a decision on their second choice before coming off the waiting list for their first. Hospitals, too, were displeased with students who initially accepted their offers only to renege and turn it down later for one of their more preferred placements.
Matching Preferences
In 1945, schools decided to band together and agreed not to release student records until their senior year. This alleviated the problem of early placement offers, but created a new one. Some students received offers from their lower choices but were informed they were on waiting lists at their more preferred options. Imagine the student’s displeasure when they were forced into a decision on their second choice before coming off the waiting list for their first. Hospitals, too, were displeased with students who initially accepted their offers only to renege and turn it down later for one of their more preferred placements.