New health care law changes student loans
By Andrew Sheeler
Sun Star Reporter
On March 30, President Barack Obama signed the Health Care and Education Reconciliation Act of 2010 into law. Most of the attention the bill has received has been focused on its health care provisions. But the new law also contains some changes in how student loans are administered. Those changes could ultimately make more money available to students.
Starting in the fall of 2010, the law will end the practice of federally subsidized private loans. That means that, instead of private entities like banks making loans which the federal government guarantees, the loans will be made directly by the Department of Education. The bill’s supporters, including Obama, say the change will cut the federal deficit by $87 billion dollars over 10 years. The law also raises the 2010 maximum for need-based Federal Pell Grants to $5,500. Pell grants, unlike loans, do not have to be repaid. The savings realized by the direct lending will be put back into the loan program and may result in larger future Pell Grants.
For students applying for loans, the changes are fairly minor. Instead of signing a Master Promissory Note (MPN) with a private lender like CitiBank or Wells Fargo, all students seeking financial aid will sign an MPN with the Department of Education. Of course, outstanding loans to those private entities will still need to be repaid. A change to the process, however, is that all students will be required to complete an online loan entrance counseling session before signing their MPN, to ensure that students are aware of the obligation that a student loan entails.
The real changes will occur behind the scenes, and the reform has been met with some trepidation. “There’s no good time to change,” said Jackie Alleyne-McCants, associate director of UAF financial aid. She said that UAF would embrace the new policy but that implementing it will be an onerous task. Alleyne-McCants said that while students should notice little change, there will be significant changes “on the back end of things” as the university will be required to work hand in hand with the Department of Education.
Alleyne-McCants said she is sad to see the old system go. UAF is comfortable, she said, with the private lender policy and the system generally has worked well. But she said that if this reform has the support of the federal government then “we’ll support it too.” Alleyne-McCants said she’s hopeful that more money for Pell Grants will translate into more students being able to go to school.
This is actually not the first time that UAF has participated in a direct-lender program. Alleyne-McCants said that UAF tried direct lending in the early part of the last decade but that, after a couple of years, the university decided to switch back to private lending.
One benefit that students may notice: much less time waiting for their money to arrive. In the days of private lending, students often waited up to six days for the lenders to certify their MPN before a check would be mailed. Under this new policy, students should see their money within 24 hours of signing an MPN since now that money comes directly from the university, which then gets reimbursed by the government.