A better way to get government loans for college started on July 1. Now the Department of Education originates all federally guaranteed student loans. Earlier this year, bank lobbyists were outraged when a measure ending their student loan racket was added to the health care reform bill. 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.
Federal student loan shift saves taxpayers billions
The government estimates that it will save $ 68 billion in yen years by ending student loan subsidies for big banks. As of July 1, all colleges and universities participating in federal student loan programs can be required to offer all new loans through the Federal Direct Loan Program (FDLP). The government claims the FDLP is a more reliable lender for students and more cost-effective for taxpayers.
Students getting a better deal
Students getting government loans for college now do so exclusively through the Department of Education. USA Today reports that the Federal Family Education Loan Program (FFELP), which had allowed banks and other commercial lenders to offer federally guaranteed loans, has been eliminated by the FDLP. 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.
Scholarships take the place of bank profits
Money saved by ending commercial bank subsidies for government college loans goes to the Federal Pell Grant program. Students from lower-income families qualify for Pell Grants, which aren’t repaid. Native Times reports that beginning this fall the maximum Pell Grant amount increases by $ 200 to $ 5,550, where it will remain until 2013-2014.
Students must adapt to changes instantly
A secure site for the federal government’s new program, studentloans.gov, provides all the electronic forms students have to file for federally guaranteed student loans. Kenosha News reports the change is putting pressure on colleges and universities in both responsibility and also the volume of students that have to be processed. Financial aid directors are advising students and/or their parents to contact their college’s student financial aid office with questions faster, instead of later.
Discover more information here:
usatoday.com
nativetimes.com
kenoshanews.com
