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Yesterday, President Barack Obama signed the bill overhauling the student loan industry into law. This law will make major changes in student loan programs, most notably, cutting out banks as middlemen and making the education loans a direct government to student transaction. The changes in this law are expected to save taxpayers about $68 billion dollars over the next ten years.
According to a report by Reuters, the changes to the student loan process were passed by Congress as part of the health care 'fix-it" bill voted on late last week. Although the popularity of the healthcare reform law is mixed, a CNN/Opinion Research Corporation survey conducted last week found that 64 percent of respondents approved of the new law and only 34 percent were opposed.
The law will make changes not only in how the loans are granted, but how they are repaid. Under the new system, annual loan repayments will be capped at 10 percent of the borrower's annual income. The law will also ensure more funding will be provided to the country's community colleges and awards $2.55 billion to historically black colleges and universities.
Reuters reports President Obama has said that the student loan industry as a whole, including loan giant Sallie Mae, "fought tooth and nail" to prevent the law's passage. Under the new system, private lenders would still have a role, but a much less lucrative one, servicing loans, and assisting in payment collections.
Lenders and other opponents, including Republicans, say the new law will reduce students' lending options and eliminate the jobs of thousands of private lenders, hurting the efforts of a still struggling economy to rebound and to remedy the 9.7 percent unemployment rate.
According to the White House, money saved from the changes under the new law will help expand and strengthen the federal Pell Grant program for students.