Student Loan Bill Passes the House
Mar 22nd, 2010 @ 2:24 PM by Debbie Dragon
Update March 25th, 2010: The Senate also approved the bill , all but assuring it will become law.
This past Sunday, the House passed the largest student loan overhaul seen in decades. Under the new legislation, federal backing of private student loan lenders will end, and instead the federal government will be funding student loans. While private companies will still help in servicing the loans, the federal government will now be issuing them. The savings for this program is in the billions. Just over $60 billion over ten years is the projected savings according to the Congressional Budget Office.
The student loan bill, which had previously passed in the House but stalled in the Senate, was this time tacked onto Obama’s health care bill that passed the democrat led House this past Sunday. Obama plans to sign the bill into law this week. Once he has done that the Senate will have the final say. The Senate is expected to vote and is predicted to give its approval later this week.
Since 1965 private lenders have benefited from the government’s backing of student loans. Critics of the bill say it allows unwarranted government takeover and will limit the choices students have in obtaining loans for their college education. Those in favor of the bill say the savings of $60 billion just makes common sense.
Sallie Mae, the top issuer of student loans today, along with other lending banks, will certainly be affected. The student loan business is right around $92 billion annually. These companies have had a good deal of time to prepare for the changes that are coming and they will still be assisting in servicing the loans.
Miller, the House Education Committee Chairman commented on the bill saying, “We can reform the student loan program by taking these wasteful subsidies (to private lenders) and redeem the savings for millions of families and students who want a shot at attending college.”
The $60 billion savings would in part help fund other areas of education that are in need. Close to $36 billion is allocated to help fund Pell grants, $2 billion will go to help fund community colleges and $2.6 billion to help fund historically black colleges. An additional $1.5 billion has been allocated to help out graduates who are in the process of paying back their loans. Borrower’s monthly loan payments will now be capped at 10 percent of the borrower’s income. Payments are currently capped at 15 percent of the borrower’s income.
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.