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 cash after it has been given to the school by the lending institution. The bank receives payment for this service via subsidies. The student loan bill cuts these subsidies out of the budget. Instead, the Department of Education will act as the lending institution. By cutting these bank subsidies out of the budget, the federal government will save about $ 6.1 billion each year.
The student loan bill increases education funding
With the savings of the student loan bill, the Department of Education can be able to reinvest about $ 30 billion back into education. The student loan bill says that the $ 30 billion will be used in part to increase the low-income Pell grant. For students using the income-sensitive repayment prepare, the student loan bill will also decrease monthly payments. This repayment prepare will help make college more affordable for more students.
Criticisms of 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. The loan industry also maintains that by cutting out their part, the government can be cutting jobs. However, the government will need to hire people 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, Congress will maintain their power to set rules, eligibility, and interest rates for these loans.
