Loan reform helps everyone

Health care reform has received so much attention this week that hardly anyone noticed the major remodeling to the student loan program.

While we believe health care reform is a significant issue, the student loan changes are also crucial. We were happy to see that the new legislation that President Obama signed on Tuesday will be more beneficial for you now as students and even after graduation.

The biggest difference between the current student loan program and the new one that will begin July 1, 2010 is that students will be borrowing their money directly from the government.

The way it works now is that the government gives private banks federal subsidies to administer the loans to students. The private banks charge a fee for being the middlemen during the student loan process. Cutting out banks and only allowing students to borrow federal money from the government eliminates billions of dollars in fees.

Banks are upset that they will be losing out on billions of dollars. You should be thrilled, though, because that money is going back into universities.

The money saved from the fees will be put into the Pell grant program. The new reforms are expected to contribute an additional $36 billion dollars to the program that provides money for low-income students.

With the number of people attending college increasing, students need those billions of dollars to help pay for our ever-climbing tuition.

Bright Futures reform is right around the corner and is expected to include new requirements with higher GPA and SAT scores. Critics claim it will eliminate funding for low-income students who traditionally have lower scores.

The changes in the student loan program will help offset some of the money that might be lost during the Bright Futures reform.

Without the new laws the maximum amount of aid awarded to a student under the Pell grant would have dropped from $5,350 to $2,150. The new law will keep the maximum amount the same for now, and increase it to $5,975 by 2017.

Besides providing more money for college students, the student loan reforms will mean a brighter future for you post graduation.

Although the new law does not change current loans that students have already taken out, it does lower the cap on monthly payments. The changes include a drop from 15 percent of discretionary income to 10 percent, shorting the repayment term from 25 years to 20 years. After 20 years the balance might be forgiven, too.

In addition to all of the savings in fees the new student loan program is expected to reduce the deficit by $10 billion dollars over the next 10 years, according to the House Committee on Education and Labor.

The changes could very well make your college experience and your life after graduation less stressful.

With the new program going into effect July 1, 2010, you have plenty of time to research the changes further. Make sure to stop by the financial aid office if you want to know more.