The healthcare legislation that President Obama and Congress approved less than a month ago included a change to student loans that will eliminate fees paid to private banks, expand Pell Grants and make it easier for students to repay loans after graduation.
“For a long time, our student loan system has worked for banks and financial institutions,” Obama said on the White House Web site. “Today, we’re finally making our student loan system work for students and all of our families.”
The law will increase the maximum Pell Grant to $5,975 from $5,550 by 2017 and provide 820,000 more grants by 2020.
“Altogether, we are more than doubling the amount of Pell Grant funding that was available when I took office,” Obama said. “It’s one of the most significant investments in higher education since the GI Bill.”
Obama said the legislation would free up $68 billion over 11 years to spend on student loans and Pell Grants.
In addition, the new Income-Based Repayment Plan will allow students who borrow money to cap payments at 10 percent of their discretionary income starting in July 2014, instead of 15 percent.
“This would have been helpful when I was borrowing money,” UH alumnus Randy Sanchez said. “I graduated in December and am getting ready to pay off all my loans that I owe to four different banks.”
If students keep up with their payments, they will be able to have any remaining debt forgiven after 20 years instead of 25. That window can be decreased to 10 years if they are in public service positions such as teaching, nursing, firefighting or serving in the military.
Borrowers in the process of repaying federal student loans and new borrowers with large debt loans or low-income jobs will qualify.
“Whenever I take out a loan, the only time I touch that money is when I need to pay for a semester,” education sophomore Lynnea Hagart said. “I pay for my books and everything else with the money I earn by working. I can tell it’s trying to get people out of debt of school loans, but if they are making it easier for people who have a low income to take out money, then they are still making it easier to put them in debt. I’m for it, but at the same time, it’s something new.”
Community colleges also expect to benefit from the student loan law.
According to the White House Web site, it will offer $2 billion over four years for community colleges to develop improve and provide education and career-training programs.
While the Pell grant changes will eventually be funded, in order to comply with the new qualifications guidelines, the Department of Education was forced to revise their Pell grant calculations for the 2010-2011 school year- using the same amount of funding that they used in their January planning. This has resulted in extending new awards to students that would not have received them, but also lowering awards for students whose cost of attendance is less than $5,550. For next year, at least, most Pell students who attend community colleges will receive smaller awards than the amounts planned a couple of months ago.