Obama Signs ‘Meaningful Reform’ of Student Loan System

President Obama today signed into law a landmark overhaul of the federal student loan system that promises to bolster Pell Grant funding, make it easier for graduates to repay college aid and save $68 billion by eliminating “middlemen” lenders.

Obama made a point to highlight the education reform aspect of the Health Care and Education Reconciliation Act of 2010.  Obama signed the legislation at the Northern Virginia Community College in Alexandria, Va.

“We are finally undertaking meaningful reform in our higher education system,” Obama said. “So this week, we can rightly say the foundation on which America’s future will be built is stronger than it was one year ago.”

The reform ends decades-long federal subsidies currently given to banks and other financial institutions that make guaranteed student loans. About half of all undergraduates receive federal student aid, and about 8.5 million students qualify for Pell Grants.

Starting July 1, all federal student loans will be direct loans with the Department of Education, processed by private companies contracted by the government.

According to a WhiteHouse.gov blog posting today, the student loan reform will:

• Boost the Pell Grant program by $40 billion more dollars to ensure that eligible students receive an award, and that awards increase to keep pace with rising tuition.
• Provide a $2 billion investment over four years for community colleges to develop, improve, and provide education and career training programs.
• Enable students to choose to limit their student loan payments to 10 percent of their income, with any remaining balance forgiven after 20 years.
• Provide public service workers can have their loans forgiven after 10 years.

White House officials say to go to http://www.studentaid.ed.gov/, or call 1-800-4FED-AID for more information on financial aid.

See Related Article:
Obama on Student Loans: More College Aid; No ‘Middlemen’