Good news today for future college students: Obama signed into law an overhaul of the student loan program that will make loans easier to get and more affordable to repay.
The changes are expected to make higher education more widely available to underprivileged youth, but will also cost jobs in the private student lending sector.
The new student loan regulations got drowned out in all the sound and fury over health care reform, but they’re nearly as far-reaching in terms of education as the health care reform bill is in its field.
The new law eliminates fees paid to private banks for facilitating student loans. These fees are not small change: they add up to almost $70 billion dollars over an 11 year period. Most of that savings will go to expanding Pell grants for poor students. Pell grants will be pegged to inflation over the next few years, gradually increasing the maximum grant available.
The law will also invest $2 billion dollars in community colleges over the next four years.
The real win comes a few years down the road though. Starting in 2014, students will be able to cap their loan repayments at 10% of income above a basic living allowance. As long as they keep their payments current, the loan balances will be forgiven after 20 years. For those who go into public service jobs like police work or teaching, the loans will be forgiven after 10 years.
As a person who is still paying off her student loans a decade after graduation, I am unspeakably happy about this bill. It means my daughters’ generation won’t be hobbled by massive student loan debts the way my peers have been.
Hopefully, this will not only expand higher education to millions of less affluent high school grads, as it is designed to do, it will also allow recent college graduates more flexibility and creativity in their careers. I know more than a few people who would be enterpreneurs and artists if it weren’t for the yoke of student debt they carry.
Photo: MC Quinn
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