On March 29, 2010, President Obama signed a bill to assist student loan legislation that goes into effect in 2014. One goal of the bill was to produce the most college graduates by 2020 . The bill will:
1. End subsidies to private banks that will no longer be allowed to make student loans with federal money, but may continue to earn income by servicing those loans.
2. Double funding for Pell Grants limits up to $5,550 in 2010 and up $5,975 per student by 2017. The Pell Grant will rise with inflation starting in 2013.
3. Cap a graduate's annual student-loan repayments at 10 percent of his or her income.
4. Help an additional 5 million Americans earn degrees and certificates over the next decade, by revitalizing programs community colleges across the country.
5. Expand Perkins Loan program.
6. Keep student loan interest rate at 3.4%.
7. Increase funding to College Access Challenge Grant Program to increase financial literacy and help retain graduate students.
8. Starting July 1, 2010, federal student loans will be originated through the Direct Loan program instead of through the federally guaranteed student loan program.
9. 100 percent of student loans will be serviced by private lenders who will have to compete for contracts to service federal student loans. Direct Loans can only be serviced by U.S. employees.
Under current legislation the government spends billions of dollars each year subsidizing financial institutions that make guaranteed federal student loans. This new legislation will generate approximately $68 billion in savings over the next 11 years.
The money saved will be used to expand the existing Income Based Repayment program for federal student loans. Under this program, student loan borrowers can have their monthly payments capped at 10 percent of income they have left over after covering basic needs, and any remaining debt will be forgiven after 20 years which will make it easier to pay back student loan debt. The current limit is capped at 15 percent of income left over.
This is great for public service workers such as nurses, teachers, military, etc. who will have their remaining debt forgiven after 10 years. Loans taken out in after July 1, 2014 will have to devote 10 percent of their income to paying back their student loans.
The Pell Grants will now provide $40 billion to eligible students to receive financial aid to help defer college costs including historically black colleges and universities. The legislation also provides new funding for community colleges to develop online courses, build partnerships with local employers, and help students obtain skills to ensure they succeed in the workforce.
Sallie Mae and many other lenders fought hard against the legislation but lost.
1 comment:
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