The controversial Health Care and Education Reconciliation Act of 2010 signed into law last month includes changes to federal loan and financial aid programs that may affect students as soon as next fall.
Janel Fitzsimmonds/Contributing Photographer
Dennis J. Chavez, director of Financial Aid Services at Binghamton University, said that although the bulk of student loans at BU will likely remain unchanged, the new legislation will affect some students in a positive way.
According to Chavez, the number of BU students eligible for a Pell Grant will increase from 100 to 150 next year. The Pell Grant, a main federal grant program, similar to the New York State Tuition Assistance Program grant, provides need-based grants to low-income undergraduate and certain post-baccalaureate students.
Since 2007, BU has distributed loans directly only from the federal government. For a period of two years BU experimented with federally backed private loans, but that proved unsuccessful in providing significant financial savings.
“We felt it was a better way of managing and distributing student loans,” Chavez said of the Federal Direct Student Loans. He also said students should not see any changes in the way financial aid is distributed as a result of the new law.
The legislation will end the federal government’s practice of subsidizing private banks to act as middlemen in the college loan process. The billions of dollars once used to back the private loans will be redirected to fund community colleges, strengthen the Federal Pell Grant Program, extend support for historically black colleges and minority institutions and help students manage their student loan debt.
Prior to the signing of the legislation March 30, loans were processed through either the Department of Education or banks. The reform now requires all universities nationwide to borrow directly from the Department of Education. Students, however, are still able to seek out private loans independent of their college or university.
During the academic year from July 1, 2008 through June 30, 2009, the Pell Grant award maximum per student was $4,600, according to the U.S. Department of Education. The amended funding, as passed by Congress and signed by President Barack Obama, will offer over 800,000 additional Pell awards over the next 10 years and raise the amount to almost $6,000 to reduce the effect of inflation on the value of the grant.
The bill is expected to save $68 billion on American taxpayer dollars over the next 11 years, reforming the education system to make college more affordable and accessible.
“This legislation means $40 billion more … in the Pell Grant program to ensure that eligible students receive an award, and that awards increase to keep pace with rising tuition,” reads the White House’s Web site.
If a student is unable to repay the full debt within 20 years while choosing to make payments that are 10 percent of their income, the unpaid debt will be forgiven. Loans to public service workers will be forgiven after 10 years.
But some, like Andre Lowden, are not entirely in favor of the law.
Lowden, a junior majoring in accounting, has a Pell Grant, and he is concerned that this will add bureaucracy to the process.
“My experiences have been riddled with problems time and time,” he said. “The financial aid process is already convoluted as it stands, and this for many students will only serve as an added difficulty.”
Lowden still thought that the law could have positive consequences.
“Maybe now that we all have to go through the Department of Education rates can be lower,” he said.
At the national level, lawmakers like Arkansas Sen. Blanche Lincoln criticize the bill for being tucked in with the health care reconciliation bill.
“The reconciliation package devised by the House includes matters unrelated to health care,” she said just before the passage of the bill. “I cannot support this process.”
In general, Chavez reminds students to finish filing their 1041 tax returns and their FAFSA reports, as well as budgeting their finances.
“Binghamton continues to offer a great value,” Chavez said. “We’re very optimistic. This is good news for students in terms of funds.”