Student Loan Reform 2010


Don Coker/MCT

Published: April 15, 2010

The recent healthcare reform bill has incited a sufficient amount of both approval and controversy. Consequently, its unveiling has greatly overshadowed the new student loan reform. Students must take the necessary precautions in order to secure their withstanding-and future loan funds. The following list briefly summarizes the recent changes due to the new legislation.

  1. STAFFORD LOANS ELIMINATED: The new legislation will completely eliminate the “Stafford” loans that were previously administered by private firms and commercial banks and replaces them with lower interest loans provided directly by the government.
  2. NO MORE MIDDLEMEN: Students will no longer have to shop around for the best possible rate and most convienent payment plan. By establishing the government as a direct lender, a visit to the school’s financial aid office will suffice.
  3. PELL GRANTS INCREASED: By cutting out the middlemen (private banks and independent firms) in the loan process, the new legislation will save approximately $60 billion over the next 10 years. Ultimately, this money will increase the amount of Pell Grants offered to students. The maximum Pell grant is currently $5,550. Due to the new reform, this will rise to $5,900 in 2019.
  4. REPAYMENT PROCESS AMELIORATED: After receiving a loan, students also incur the heavy burden of the repaying the accumulated debt. However, the newly established system greatly facilitates this arduous process. For example, loan payments are currently based on 15 percent of the student’s disposable income. However, the new system will cap the payments at 10 percent of the student’s income.
  5. WITHSTANDING DEBTS FORGIVEN: In addition, any withstanding debt after 20 years will be forgiven. For public servants, debts will be annuled after 10 years.
  6. NEW MASTER PROMISSORY NOTE NECESSARY: Students with loans established before the reform must complete a new Master Promissory Note in order to receive their financial assistance.
  7. LEGISLATION EFFECTIVE JULY 1: Student loan changes will go into effect for loans filed on July 1. In order to take the necesssary steps, students should visit the school’s financial aid office.