Health care bill strips student loans from private lenders
President Barack Obama approved changes to the U.S. student loan program Tuesday as part of the new health-care reform bill.
Secretary of Education Arne Duncan said the House and the Senate have approved legislation — the Health Care and Education Affordability Reconciliation Act of 2010 — that will overhaul the student loan industry and government financial aid programs.
Duncan said this legislation will eliminate a $61-billion program that supports private banking companies that make federally-backed student loans, which offer the lowest interest rates because the government assumes the risk if students fail to meet their financial obligations.
Students will now solely go through the federal government to get their student loans. However, students will continue to work with their school’s financial aid offices to request student loans, he said.
Duncan described the legislation as a rare opportunity to invest billions of dollars in students, which will allow millions of hardworking families to afford college.
The government will use $36 billion of the $61 billion it saves over 10 years to increase Pell Grant scholarships — need-based financial aid that doesn’t need to be repaid — making college more affordable for millions of middle-class Americans, according to the Congressional Budget Office report.
This legislation will increase the maximum annual Pell Grant scholarship to $5,350 in 2010 and to $5,975 by 2017. Starting in 2013, the scholarship will increase as the cost of living increases.
The rest of the savings will be used to make student loans more manageable for borrowers and strengthen community colleges, the report stated.
Caryn Pacheco, OU Financial Aid Services director, said 3,927 OU students received $12,658,516 in Pell Grant scholarships for the 2008-2009 school year.
“It is anticipated with the increase in the value of the Pell Grant, more funds will be available,” Pacheco said.
According to the Department of Education Web site, more students with unemployed and underemployed parents have been qualifying for need-based financial aid. This legislation will invest $13.5 billion of the $36 billion allocated for the Pell Grant scholarship program to meet the increased demand.
Without this investment, 8 million students nationwide could see their Pell Grant scholarships cut by 60 percent next year and 600,000 students nationwide could lose their Pell Grant scholarships completely, the Web site stated.
U.S. Rep. Tom Cole, R-Okla., said this legislation would negatively affect students who use financial aid to pay for college.
Cole, who represents Oklahoma’s 4th district, said the government took money out of the $61-billion program and used it to pay for health care. As a result, he said students are going to pay higher interest rates on their student loans to help finance the health care bill.
“The student loan provision is one of many aspects of the health bill that will have a negative effect on the economy,” Cole said. “New regulations will take lending authority out of the private sector and put it under government control — forcing 30,000 people out of work and throwing millions of college students into administrative limbo. Like most regulations in the new law, it will probably be years before the full consequences are understood.”