With all of the hoopla surrounding the passing of the healthcare package, the revamping of student loan programs that came as part and parcel of the package was generally overlooked. This revamping cut off billions of dollars in profits in what can best be described as a restructuring of existing financial aid programs in the United States.
So, here is the back story …companies and commercial banks such as Sallie Mae (I always loved the David Sedaris description of the mistaken assumption that Sallie Mae is a sweet, unassuming farm girl in pigtails, when in reality is an evil corporate giant) and Nelnet have received federal subsidies since the inception of the bank-based loan program in 1965. Representative George Miller, a Democrat from California spoke out against the program, which seemed to be counterproductive to many government officials. He said, Why are we paying people to lend the governments money, and then the government guarantees the loan, and the government takes back the loan?
In effect, the legislation pulls back money from those programs and provides a massive infusion of money to the Pell grant program and offers new help to lower-income graduates who are trying to get out from student debt.
Opponents of this bill are angry that the bill seems to give power to the government which will be too far reaching. By attaching this education finance overhaul to the healthcare package, it virtually guaranteed its passage.
Still, the numbers are too large to dismiss. This direct lending approach is said to save taxpayers 61 billion dollars over the next ten years, $40 billion of which will e redirected to higher education. Education programs will get an additional 10 billion from the healthcare package. There will be an increase in the Pell grant for students from $5550 to $5900. Paying back student loans will also be easier as the legislation will reduce the share of income that a graduate must devote to loan payments by accelerating loan forgiveness. Though this only applies to those who take out loans after July 1, 2014.
There were a number of other measures that were scrapped in the final version of the bill, before it passed, and that was definitely a disappointment to students returning to college and attending community colleges. However, this legislation may be a step in the right direction for the struggling college student.
For more information on this legislation: www.whitehouse.gov
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