Hidden inside the health care reform bill that congress passed on Sunday was a bill that will reform the student loan system. Saving $ 61 billion in just 10 years, the student loan bill will change how student loans are administered. $ 30 billion of those projected savings can be going back into education, while one-third of that could be used to reduce the national debt. Student loans will no longer be administered by financial institutions – instead, the Department of Education will administer them.
Student loan bill concentrates on administration
The biggest change how the student loan bill will implement is in how the student loan program works. Currently, Congress sets eligibility rules, interest rates, and most of the rules about how student loans are administered. Students currently apply for a low rate personal loan through the Department of Education, who then works with lenders like Sallie Mae. The lending institution then distributes cash to the school. . The student loan bill cuts these subsidies out of the spending budget. The department of education will take over the job of administering loans. Just by cutting out subsidies, the government will save approximately $ 6.1 billion a year.
Reinvesting with the student loan bill
Because of the savings the student loan bill, the Department of Education can be reinvesting $ 30 billion into college education. The Pell grant, which is used by low-income students to pay for school, can be increased by the student loan bill. The bill will also reduce the monthly payments that some students have for making on their loans, which will help make college more affordable for more people.
Arguments against the student loan bill
Even though this bill saves the government billions of dollars a year and reinvests in education, there are criticisms. Each year, tuition and costs rise by a double-digit percentage, and the student loan bill doesn’t increase Pell grants enough to compensate for this inflation. The loan industry also maintains that by cutting out their part, the government could be cutting jobs. However, most hypotheses say that comparatively few, if any jobs could be lost, as the government will have to hire staff to administer the loans. Finally, there is concern that the interest rates on each unsecured personal loan students take out through the D.O.E. will go up. However, the power to set these interest rates has always been with and will remain with Congress.
