Friday, March 26, 2010;
Legislation to overhaul student lending and raise funding for higher education is headed toward becoming law. Here are some highlights:
-- Thousands of schools that had relied on private lenders to issue federally guaranteed student loans must switch by July 1 to direct lending from the U.S. Education Department. Many are already doing that. Interest rates will be unaffected. Proponents of guaranteed student loans say private lenders have provided students with better service than the government. But many financial aid administrators and government officials disagree.
-- More than half of the estimated $61 billion in savings over 10 years reaped from the lending overhaul would be channeled into student aid: $36 billion for Pell Grants for needy students. The maximum Pell award would rise from $5,550 in the next school year to a projected $5,975 by 2017, with the grants linked for the first time to the consumer price index in 2013.
-- Recent college graduates who qualify for loan repayment relief would get more help. Currently, the income-based repayment program allows borrowers to cap monthly federal student loan payments at 15 percent of discretionary income and forgives the remaining balance after 25 years. The bill would lower that cap to 10 percent for new borrowers after 2014 and forgive remaining debt after 20 years, costing the government $1.5 billion.
-- The bill would also provide $2.55 billion to support historically black colleges and universities and minority-serving institutions; $2 billion for community colleges; and $750 million for a college access and completion program for students.
-- Nick Anderson