Government-run aid programs for college students received an overhaul with the passage of a new aid reform bill which was voted on alongside the widely-publicized healthcare bill.
The Health Care and Education Reconciliation Act of 2010 was signed into law Tuesday by President Barack Obama. "What's gotten overlooked amid … all the drama of last week, is what happened in education - when a great battle pitting the interests of the banks and financial institutions against the interests of students finally came to an end," Obama said.
As part of the budget reconciliation process, the bill could not be stalled by a Republican filibuster and won a simple majority vote in the Senate, 56-43 and in the House of Representatives 220-207.
The new reforms will restructure the existing financial aid system so that students receive their loans directly from the United States Department of Education and not through private lenders like Sallie Mae. The bill eliminates the Federal Family Education Loan program, which grants subsidies to large banks that lend to and collect from students.
According to the White House, the elimination of existing subsidies will save the federal government an estimated $61 billion over 10 years. This money will be reinvested into the Pell Grant program, which awards scholarships to approximately 7 million students annually based on need.
Under the new legislation, the maximum annual Pell Grant scholarship will increase to $5,550 from the current $5,350. Starting in 2013, the program will be linked to the Consumer Price Index and is expected to offer scholarships of up to $5,975 by 2017.
Starting in 2014, new lenders who are eligible for income-based repayment programs can limit the yearly loan repayments of borrowers to just 10 percent of their annual income. Those who make regular payments will receive total debt forgiveness after 20 years.
Another part of the plan calls for the investment of several billion dollars into historically poor and minority colleges.
"The legislation really is, in the words of Joe Biden, 'a big deal,'" said sophomore Mike Terreri, a history major.
More information about federal student aid programs is available at ed.gov.