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It has been over a year since President Obama announced his hopes to bolster student aid by overhauling the student loan system, and last week (in the same piece of legislation that pushed through his health care reform) changes were finally made–but they weren’t at all what many higher education advocates, parents and students had hoped for.
The Real Deal
As I mentioned recently, the bill’s long hold up in Congress meant that funding dropped by $26 billion, taking away critical funds that could have gone to uphold the impressive outline for change President Obama initially announced in February of last year. Subtract from that the $19 billion reallocated to help cover the cost of the new health care initiative, and students now get less than half of what the Obama administration initially projected. With the legislation now passed, we can finally analyze what changes have–and have not–been made.
What Will Change
What Will Not Change
President Obama’s 2009 higher education budget proposals also included several more significant improvements; all which had to be scrapped due to the budget cuts that became necessary to get the bill to the point where it would pass. Here is a quick summary of the proposed changes that will NOT go into effect:
Will This Hurt Your Family’s College Funding Plans?
While the new version of the bill certainly won’t help as many families as its original draft, it most likely won’t materially affect your college funding plan.
However, the new Direct-Lending-only policy does mean that private lenders will no longer be able to offer federal loans–and the interest rate and loan origination discounts of the past that helped private lenders compete and families reduce their borrowing costs, were all eliminated with the stroke of President Obama’s pen. Think of it as just one more reason to do all you can to minimize your child’s need to acquire student loan debt.
All the best,
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.