In 2010, Uncle Sam is switching up the traditional student loan system. If you’re in college, have children in college or are planning to go back to college soon, you’ll want to check this out.
2010: Student Loans Change
For more than four decades, students borrowed money from the US Government in order to pay for college. However, in May 2010, congress narrowly overhauled the federal student loan market. These changes went into effect on July 1 of the same year. All students borrowing money from the federal student loan program started borrowing directly from the federal government, rather than through a private lender. This, of course, led to accusations that the government was taking over banks. Despite these arguments, the proposals were passed.
A Closer Look At Student Loans
One of the immediate effects of this change is reflected in the loan interest rates. Direct loan interest rates for the academic year of 2010-2011 were dependent upon the type of loan. Subsidized Stafford loans are rewarded based on financial need and had the lowest interest rate at 4.5 percent. Unsubsidized Stafford loans, which are offered to students no matter their financial need, offered a rate of 6.8 percent. PLUS loans had interest rates of 7.9 percent.
Along with these rates came limits on the amount of these loans. Freshmen could receive up to $5,500, sophomores up to $6,500 with juniors and beyond qualifying for up to $7,500. These limits were set by an additional provision that was tacked onto the bill and only applies to students who enrolled after the start of 2010.
Student Loan Q & A
With these new provisions, many students and parents are trying to understand what all these changes really mean and how they will be affected. The following are just a few of the questions being asked.
Q: How much money will the government save?
A: Taxpayers will save $68 billion over the next 11 years, according to the Congressional Budget Office.
Q: How will this affect students and their parents?
A: A chunk of the savings will go toward Pell Grants for college students – to award more grants and to provide larger amounts. Community colleges and institutions with predominantly minority populations will also receive funding.
Q: Will the changes bring down college costs?
A: No. President Obama acknowledged this before signing the bill and urged colleges and universities to “do their part” to hold down costs.