On July 1 getting government loans for college changed for the better. Rather than banks, now the Department of Education handles federally guaranteed student loans. The change was part of the health care reform bill passed in March that had bank lobbyists kicking and screaming. The government has removed banks as the middleman for federally guaranteed student loans, and ended the billions of taxpayer dollars in subsidies paid to banks for pushing paper on those loans.
Overhaul of federal student loans to conserve taxpayers billions
The end of student loan subsidies for big banks will create $ 68 billion in savings over the next 10 years, as outlined by government estimates. Colleges and universities are required to offer all loans through the Federal Direct Loan Program (FDLP) from July 1 forward. Students and taxpayers could be served better by the FDLP, the government said.
What changes with federal student loans?
All new government loans for college are now issued directly through the Department of Education’s Direct Loan program. USA Today reports that the FDLP eliminates the Federal Family Education Loan Program (FFELP), which had allowed banks and other commercial lenders to offer federally guaranteed loans. Affected loans include subsidized and unsubsidized Stafford Loans for undergraduate and graduate students, as well as PLUS (Parent Loan for Undergraduate Students) for parents and PLUS loans for graduate and professional degree students.
Bank profits retooled into scholarships
Money saved by ending commercial bank subsidies for government college loans goes to the Federal Pell Grant program. Pell Grants, money that doesn’t have to be repaid, go to students from lower-income families. Native Times reports that the maximum Pell Grant increases by $ 200 this fall to $ 5,500, and stay there until 2014.
new program changes requirements for students
This year students with a federally guaranteed student loan must file electronic forms through the federal government’s secure site for the new program at studentloans.gov. Kenosha news reports that colleges and universities are under pressure to meet their responsibility to process the volume of student applicants. Financial aid directors are advising students and/or their parents to contact their college’s student financial aid office with questions quicker, rather than later.
More details available at these websites:
usatoday.com
nativetimes.com
kenoshanews.com
