Digital News Report – President Obama will be signing off on the reform of the student loan industry today according to White House Reports. The new federal health care reform had included a reform of the student loan program.
The new program would kick in on July 1st. Any student that takes out a federal student loan will be making the deal directly with the US government instead of private financial institution. It will help lower monthly payments for low-income individuals and payments for graduate students and parents that take out PLUS loans. There will be an increase in Pell grants that will begin next school year.
Pell Grants will increase because of the savings not spent to the middle man. The increase is modest but in the 2010-2011 academic year it will be increased to $5,550 which last school year it was $5,350. The new number will stay the same for the next 5 years and then it will be adjusted to reflect inflation.
In addition to this, there are lower payments for graduates that have low-income. This begins in for loans made after July 1st, 2014 and if they are having financial difficulties paying back the loan they can have their loan payments capped at 10 percent of their discretionary income. The current program caps payments at 15 percent of their discretionary income.
There will be lower interest rates made for the parents and the graduate students that take out loans. Parents would be able to take out a Parent Loan for Undergraduate Students (PLUS) to help cover the extra costs not covered by financial aid or Stafford loans. The PLUS loans made with the Direct Loan program 7.9 percent interest. The private lenders rate is 8.5 percent.
This is the best news I’ve heard in a long time! Being a middle class parent it is extremely difficult to send my children to college AND to allow them to complete. The financial hardship is very difficult. I’m so glad to hear about this reform to the student loan idustry.