Built inside the health care reform bill that was passed Sunday was a radical reform of how student loans will work. Centered mainly on how student loans are administered, the student loan bill will create $ 61 billion in savings over 10 years. $ 30 billion of those estimated savings could be going back into education, while one-third of that will 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 student loan bill will mainly alter how student loans are administered. Congress has always set the rules and interest rates for how banks administer student loans. Students currently apply for a low rate personal loan through the Department of Education, who then works with lenders such as Sallie Mae. The student then gets the cash after it has been given to the school by the lending institution. The bank receives payment for this service via subsidies. The student loan bill cancels these subsidies out of the budget. Instead, the Department of Education will act as the lending institution. By cutting these bank subsidies out of the spending budget, the federal government will conserve about $ 6.1 billion each year.
Reinvesting with the student loan bill
The college education system will receive an extra $ 30 billion of funding from the student loan bill savings. . The bill may also reduce the monthly payments that some students have to make 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. The proposed increase in Pell grant funding does not begin to cover the double-digit percentage rise in tuition costs each year. There are also fears that by eliminating out the loan industry, the government will effectively be cutting jobs. Lots of of those job losses can be negated by the government’s need to hire loan administrators to work for the Department of Education. Lastly, some worry how the unsecured personal loan interest rates for student will begin to go up. However, the power to set these interest rates has always been with and will remain with Congress.
