What does this mean for the average student?
First of all, the maximum amount awarded by Pell Grants will increase. However, this will not go into effect until the 2013-2014 academic year, meaning many current students who will have graduated by 2013 are ineligible.
Researchers estimate that, with inflation, by 2020 Pell Grants could at a maximum be as much as $5,975 per year. In all, this is only a $435 yearly increase from the current maximum grant amount. The original bill in Congress proposed an increase of nearly $1,000, but the number was pared down to ensure easier passage of health care reform.
Further, the bill stipulates that eventually government loan repayment plans will be set according to a former student’s personal income, as opposed to real-money debt. However, this part of the bill will similarly take many years to implement (starting the 2014-2015 school year), and will more than likely only benefit workers on the very low end of the income scale. The benefit will cap repayments at 10% of discretionary income, as opposed to the current 15% of discretionary income rate. After 20 years of repayment, all federal loans will be forgiven, which is a decrease from the current 25 year limit.
What can you expect to change immediately?
If you receive federal loans, from the next academic year on (officially July 1, 2010), they will be distributed directly from the United States Government—they will no longer be provided by banks or private lenders. Because of this change, the possibilities of lower interest rates are increased, especially for PLUS loan awardees, who are typically graduate students and parents of students. Additionally, approval rates on federal direct loans are historically much higher than bank or middle-man managed federal loans, so families may be more likely to qualify.
Although the bill has been met with praise, there is controversy over the switch; some worry that the bill could cause tens of thousands who work for private lenders to lose their jobs, and many colleges are concerned that they will need to crunch in order to put necessary regulations in place by the July 1, 2010 due date.
Sources and more reading on the Health Care Bill:
- The Not-so-Hidden Dangers of Federal Direct Student Lending
- Student Loans: Obama Right
- Health-Care Reform and Your Student Loans
- Student-loan reform slid into health law
- Student Loan Bill Poised to Pass in Health Vote
- Student loans targeted in health care bill
Photo by Bargearse