Post Health Care Legislation – How Student Loan Programs Will Change
March - 30 - 2010 Respond
President Obama signed the Health Care “fixit” bill yesterday, which contained several new laws relating to student loans. Critics contend the new laws consist of another government takeover. Proponents of student loan legislation say that it doesn’t do enough to address current and former students who are wrestling with education debt.
The reforms contained in the bill:
- Banks can no longer offer loans to students – students must borrow directly from the U.S. government. Democrats say the new legislation will cut costs. Banks had previously received US subsidies to make student loans.
- Parents taking out student loans will pay an annual interest rate of 7.9% under the direct program, compared with 8.5% under the old program.
- Student borrowing rates for federal loans aren’t affected: 4.5% for students with financial need and 6.8% for everybody else.
- The income-based repayment limit payments to 10% of discretionary income, down from 15% and forgive debt after 20 years instead of 25.
- Provides more funding for Pell Grants, available to students from families making $50,000 a year or less. The maximum Pell grant award includes automatic increases tied to inflation.
- Public Service Loan Forgiveness Program will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. This program is for people with federal student loans who work in a wide range of “public service” jobs, including jobs in government and nonprofit 501(c)(3) organizations.
- Community colleges, the main provider of higher education for most low-income Americans, will get just $2 billion for job training. The original bill had slated 10 billion dollars but had to be cut as part of a compromise.
However, students who have crippling debt are going to be stuck with the current system until 2014, when most of the new benefits kick in. For students who are planning to go to college before 2014, they are not only borrowing under the old rules, but also face rising costs of education.
Are you happy or upset with the new laws? Tell us about it by leaving a comment!
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