President Obama signed the last piece of the health care legislation today — but it wasn’t actually health care legislation — it was, instead, an overhaul of the federal student lending operation. All students getting federal student aid will now borrow directly from the federal government instead of sometimes having to go through a subsidized private lender.
“By cutting out the middleman, we’ll save the American taxpayers $68 billion in the coming years,” the president said. “That’s real money.”
Previously, the type of federal student loan you could get depended on your school. Some schools used the Direct Loan program, while others used the Federal Family Education Loan program, where students borrowed from a private lender that was getting a subsidy. All schools will now provide Direct Loans starting July 1.
The bill also expands the Pell Grant program which helps low-income students attend college.
What does the bill mean for students? Not as much as it will mean for banks, but the process should be less confusing and it will mean lower interest rates for some borrowers, mainly parents and graduate students.
If you’re a low-income graduate taking out loans after 2014, there is some help coming for you. You’ll be able to apply to cap your payments at 10% of your discretionary income.
USAToday has a good breakdown of all of this, check it out.
For more information on these federal student aid programs, go to www.studentaid.ed.gov, or call 1-800-4FED-AID.
Obama Signs Student Loan Overhaul Legislation [ABC]
New rules streamline student loans, eliminate some pitfalls [USAToday]
Making Higher Education More Affordable [White House Blog]