Last week, President Obama signed the most comprehensive healthcare reform bill in recent history. Yesterday, he finished the job by signing the reconciliation bill into law, along with sweeping higher education funding overhaul.
The bill overhauls higher education financing, doubling funding for Pell grants, allowing students to borrow directly from the government and easing payment structures once they graduate. Most importantly, the Direct Loan program will be expanded.
Prior to the passage of this bill, financial institutions like Sallie Mae would give out loans. If students defaulted, the government would guarantee the loan and pay the company for the default. But wasteful spending by the banks has drained valuable funds away from education programs. Now, however, the loans will be coming directly from the government, so they don't have to pay companies for defaults.
By avoiding paying these “middle men”, it saves taxpayers $61 billion over the next 10 years, according to the Congressional Budget Office. Thirty-six billion of that would go to the popular Pell Grant program. More than $4 billion in savings would go to institutions that serve minorities and the rest, close to $20 billion, would be used for non-education purposes, offsetting health care reform expenses. In addition to investing in college aid, these provisions will also reduce the deficit by at least $10 billion over 10 years.
Also, loan repayments will be capped at 10 percent of a graduate's salary, down from the current 15 percent, starting in 2014. Additionally, borrowers who responsibly make their monthly payments will see their remaining balance forgiven after 20 years of repayment, reduced from 25 years in current law.
Now more than ever, Americans need affordable, quality education opportunities to help make our economy strong and competitive again. By eliminating wasteful subsidies to private bankers and switching to a system of direct lending of federal student loans, that has become reality.
As the President said in his 2010 State of the Union address: “To make college more affordable, this bill will finally end the unwarranted taxpayer subsidies that go to banks for student loans. Instead, let's take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants."
For those keeping track, that's 2 huge vitories in only 1 week. And they say the President hasn't accomplished anything.