Student Loan Bill: saving students cash

Built into 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, when one-third of that could be used to reduce the national debt. Banks and financial institutions will no longer act as the money lender on these loans – instead, the Department of Education will administer the loans.

Student loan bill focuses on administration

The student loan bill makes significant changes to the process that administers student loans. Currently, Congress sets eligibility rules, interest rates, and many of the rules about how student loans are administered. Students get a low rate personal loan through lenders who work with the Department of Education to fund the student loans. The lending institution then distributes money to the school. The lending institution will get subsidies from the government for providing this service. The student loan bill cancels these subsidies out of the spending budget. Instead, the Department of Education will act as the lending institution. In just ten years, cutting out these subsidies will conserve $ 61 billion.

The student loan bill increases education funding

Because of the savings the student loan bill, the Department of Education can be reinvesting $ 30 billion into college education. The student loan bill says how the $ 30 billion will be used in part to increase the low-income Pell grant. The bill will even 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 with the reinvestment in education, there are criticisms of the student loan bill. 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. The loan industry also maintains that by cutting out their part, the government could be cutting jobs. However, the government will need to hire people to administer the loans for the Department of Education, which will balance out some job losses. Finally, there is concern the interest rates on each unsecured personal loan students take out through the D.O.E. will go up. However, the student loan bill doesn’t change the fact Congress sets the rules, eligibility, and interest rates for student loans.