President Barack Obama appears to be on a roll lately. First there was the passage of the Patient Protection and Affordable Care Act, which has some important changes that should help out college students and young adults. But 6 days ago, he also signed into law the Health Care and Education Reconciliation Act of 2010. The main purpose of this bill was to change some of the original provisions in the first bill, but it also some important changes regarding student loans:
- 1. The federal government will no longer give subsidies to private banks to handle federally insured loans. Instead, the government will directly handle the loans.
- 2. Pell grant awards will be higher
- 3. For loans that are taken out after 2014, the maximum amount you must spend on loan repayment is capped at 10% of your discretionary income. (You must qualify for this perk.)
- 4. Loans that are taken out after 2014 will be forgiven after 20 years of timely payments. (If you qualify.)
- 5. Parents will have an easier time taking out federal PLUS loans.
Overall, these changes seem to be for the best. If the government can save money by handling loans directly, then I’m all for it. I’m not a big fan of the huge, private banks, that rake in profits, getting a discount from Uncle Sam. The 20 year loan forgiveness is nice I suppose for those who enter low-income professions, but I have no interest in paying my loans for 20 years. Hell, I’m not even comfortable taking more than 10 years to pay off any student loan debt I accrue. Finally, I’m not sure what “easier” means for PLUS loans. Are parents with lower credit scores going to qualify that wouldn’t have before? I’m not sure that’s necessarily a good idea.
{ 2 comments… read them below or add one }
The last clause is indeed ambiguous. Parents with a lower credit score getting qualified for the same will mean higher risks and troubles for the individuals in later life. I could not agree with you more about the 20 years payback thing. It is not a good idea to keep a loan ticking on your head for 20 years.
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My plan is to be debt free within just a few years after I graduate.