In addition to reforming health care and insurance, the health care reform bill Congress passed Sunday may also reform student loans. Saving $ 61 billion in just 10 years, the student loan bill will alter how student loans are administered. $ 30 billion of the] savings can be put back into education, when another $ 10 billion will go to deficit reduction. Student loans will no longer be administered by financial institutions – instead, the Department of Education will administer them.
Student loan bill changes administration
The student loan bill will primarily alter how student loans are administered. Student loans have always been by Congress, who sets eligibility rules, interest rates, and other rules. Students currently apply for a low rate personal loan through the Department of Education, who then works with lenders such as Sallie Mae. The student then gets the money after it has been given to the school by the lending institution. The government gives subsidies to banks or lending institutions who provide this service. These subsidies are cut out by the student loan bill. Instead of this three-tier system, the Department of Education will act as the lender. Just by cutting out subsidies, the government will conserve approximately $ 6.1 billion a year.
The student loan bill increases education funding
Because of the savings the student loan bill, the Department of Education will be reinvesting $ 30 billion into college education. According to the student loan bill, this money can be used to increase the maximum Pell Grant, which is used to help low-income students pay for college. The bill may also reduce the monthly payments that some students have to make on their loans, which will help make college more affordable for more people.
Opposing viewpoints to the student loan bill
There are criticisms of the student loan bill, even though it saves the government billions of dollars a year. The proposed increase in Pell grant funding doesn’t begin to cover the double-digit percentage rise in tuition costs each year. Some argue that cutting out the middlemen of the loan industry will even cut out jobs. Quite a few of those job losses can be negated by the government’s need to hire loan administrators to work for the Department of Education. Finally, some worry that interest rates on these unsecured personal loans will begin to rise. However, Congress will maintain their power to set rules, eligibility, and interest rates for these loans.
