President Signs Bill on Student Loans

President Obama signed a bill today to make college more accessible to young Americans by bringing changes to the federal student loan program. A blog post about this event from The Caucus, a NY Times blog, said:

The new law will eliminate fees paid to private banks to act as intermediaries in providing loans to college students and use much of the nearly $68 billion in savings over 11 years to expand Pell Grants and make it easier for students to repay outstanding loans after graduating. The law also invests $2 billion in community colleges over the next four years to provide education and career training programs to workers eligible for Trade Adjustment aid.

The law will increase Pell Grant grants along with inflation in the next few years, which should raise the maximum grant to $5,975 from $5,550 by 2017, according to the White House, and it will also provide 820,000 more grants by 2020. Including money from last year’s stimulus program and regular budget increases, the White House said Mr. Obama has now doubled spending on Pell Grants.

Students who borrow money starting in July 2014 will be allowed to cap their repayments at 10 percent of their income above basic living requirements, instead of 15 percent. Moreover, if they keep up their payments, they will have any remaining debt forgiven after 20 years instead of 25 years – or after 10 years if they are in public service, such as teaching, nursing or serving in the military.

There are many who oppose this bill as there are those who oppose the health care bill. One person argued that the federal loan program would overcharge the students for their loans. It was argued that this bill would result in the loss of many jobs in education and that students would have to rely on 4 federal call centers instead of the 2,000 community and non profit lenders that are available. As with any bill that calls for more government control or aid, there is a controversy. We will have to see whether this program will indeed help college students pay back their debts.