Health Care Law Contains Student Loan Overhaul

On March 30, President Obama signed into law the final health care measure, which also contained an overhaul of the student loan program.  In a diversion from the current system, the new law will eliminate the role of private banks who act as intermediaries in providing federal student loans and starting July 1, all new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the U.S. Department of Education.  This change is expected to save $68 billion over 11 years, much of which will be used to expand Pell Grants.  Additionally, the law invests $2 billion in community colleges over the next four years.
According to the White House, such changes will raise the maximum Pell Grant to $5,975 from $5,550 by 2017,  and provide 820,000 more grants by 2020. Additionally, the law makes changes to the repayment system by capping repayments at 10 percent of income above basic living requirements, instead of 15 percent. Moreover, if student loan recipients maintain their payments, they will have any remaining debt forgiven after 20 years instead of 25 years – or after 10 years if they are in public service, such as teaching, nursing or serving in the military.

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