Changes to the Student Loan Program: What it Means For You
People going back to college to finish their degree or to further their education will likely may have questions about how new laws and regulations could effect them and how the student loan program may be different than it was before. The program also has implications for new college students. The Health Care and Education Reconciliation Act was signed on March 30 and went into affect on July 1 of this year. It is anticipated that the act will save taxpayers (over the next 11 years) $68 billion.
Here’s what you need to know about the act and what it will mean for you:
What Does the Act Actually Do?
In essence, the act has eliminated the Federal Family Education Loan (FFEL) Program and made it so students no longer get their loans through banks, but straight from the Department of Education (DOE) through the Direct Loan Program. This means there is a more dependable source for student loans; one that is not threatened by the credit crisis. Some private lenders will continue to work with federal loans, but must be approved by the DOE. This also means that loans can no longer be sold to and from banks.
More Pell Grants and Larger Pell Grants
Some of the money that is saved with the new program will go toward creating bigger Pell Grants. Students who qualify could eventually receive as much as $425 more than the normally would. It is also estimated that the government will be able to give 820,000 more Pell Grants to qualifying students by the 2020-2021 school year. More funding will also go to community colleges and institutions that have large minority populations.
Easier Repayment Plans
The income-based repayment program lets students pay back their student loans in smaller portions each month. Previously, students on this plan wouldn’t pay more than 15 percent of their discretionary income; this act changes that number to 10 percent.
Now after 20 years, as opposed to the previous 25 years, of repayment, loan balances may be forgiven. For public service workers like nurses, teachers, and people in the military the time has been reduced to 10 years.
Students going back to college should consult their school’s financial aid office with questions and for loan assistance. My Colleges and Careers is an excellent resource for students looking for more information on finding a program and school and earning their degree.
