Built inside the health care reform bill that was passed Sunday was a major reform of how student loans will work. Saving $ 61 billion in just 10 years, the student loan bill will alter how student loans are administered. $ 10 billion of those savings will be used to decrease the deficit when another $ 30 could be put back into education. The student loan bill cuts out banks and financial institutions, and instead requires the Department of Education to administer student loans.
Student loan bill focuses on administration
The student loan bill makes significant changes to the process that administers student loans. Student loans have always been controlled by Congress, who sets eligibility rules, interest rates, and other rules. Students get a low rate personal loan through lenders who work with the Department of Education to fund the student loans. The lending institution then distributes money to the school. The lending institution will get subsidies from the government for providing this service. These subsidies are cut out by the student loan bill. Instead, the Department of Education will act as the lending institution. In just ten years, cutting out these subsidies will conserve $ 61 billion.
Reinvesting with the student loan bill
Because of the savings the student loan bill, the Department of Education could be reinvesting $ 30 billion into college education. According to the student loan bill, this cash can be used to increase the maximum Pell Grant, which is used to help low-income students pay for college. More students could be able to pay for student loans also – the student loan bill reduces payments over the long term.
Opposing viewpoints to the student loan bill
Even with the reinvestment in education, there are criticisms of the student loan bill. The suggested increase in Pell grant funding doesn’t begin to cover the double-digit percentage rise in tuition costs each year. The loan industry also maintains that by cutting out their part, the government will be cutting jobs. However, the government will need to hire individuals to administer the loans for the Department of Education, which will balance out some job losses. Finally, there is concern the interest rates on each unsecured personal loan students take out through the D.O.E. will go up. However, the student loan bill doesn’t change the fact Congress sets the rules, eligibility, and interest rates for student loans.
