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 will simply cut out government subsidies for lending institutions. 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 in education through the student loan bill
With the savings of the student loan bill, the Department of Education could be able to reinvest about $ 30 billion back into education. According to the student loan bill, this cash can be used to increase the maximum Pell Grant, which is used to help low-income students pay for college. More students can be able to pay for student loans also – the student loan bill reduces payments over the long term.
Opposing viewpoints to 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 cover this inflation. There are also fears that by cutting out the loan industry, the government will effectively be cutting jobs. However, most hypotheses say that comparatively few, if any jobs could be lost, as the government will need to hire staff to administer the loans. Lastly, some worry how the unsecured personal loan interest rates for student will begin to go up. However, the student loan bill doesn’t change the fact that Congress sets the rules, eligibility, and interest rates for student loans.
