Loan Reform
By Nathan Julander
Issue date: 6/9/10 Section: News
Starting July 1, students will have only one option when seeking a loan through financial aid. That option will be a loan from the U.S. government.
U.S. President Barack Obama signed the Health Care and Education Reconciliation Act into law on March 26. Inside the Act was legislation for reforming how the government handle student loans.
Before the Act, students had the option of taking out a loan directly from the government, or taking out a loan from a federally guaranteed private lender, such as Bank of America.
The reform has ended the government support for private lenders.
A student can still get a private student loan, but the loan will not be supported through college financial aid. The loan has to be taken out directly from the private lender.
The student loan reform comes as the country is still in the midst of a recession.
Amy Williamson, assistant financial aid director, says that in the 2009-2010 school year financial aid has given out close to $3 million in student loans.
This is up from $2 million the year before. She added that the number of applicants for the coming school year is higher than last year. The financial aid staff also has to adjust to changes in processing loan requests brought on by the reform.
However, Williamson says this should not raise any alarms for students. The financial aid staff is very experienced and is handling the changes smoothly.
Williamson assures students that they will not see any major changes in the application process
"We are trying to keep everything close to what they have already been experiencing," she said.
The reform was enacted largely due to the criticism that the federally guaranteed loans from private lenders were costing tax payers more than if the government did direct lending. By guaranteeing the loan, the government would repay the lender any losses it might incur for the loan.
By ending this practice and assuming sole responsibility for the loans, President Obama said that the reform will save the American taxpayers $68 billion over the coming years. Obama explained that the savings will be invested in college education.
While the reform has been championed for its benefits, it also has drawn concern.
Williamson said reform was needed but it limits students' financial options
"It's not fair for students, reducing their choices and ability to control their own education," Williamson said.
U.S. President Barack Obama signed the Health Care and Education Reconciliation Act into law on March 26. Inside the Act was legislation for reforming how the government handle student loans.
Before the Act, students had the option of taking out a loan directly from the government, or taking out a loan from a federally guaranteed private lender, such as Bank of America.
The reform has ended the government support for private lenders.
A student can still get a private student loan, but the loan will not be supported through college financial aid. The loan has to be taken out directly from the private lender.
The student loan reform comes as the country is still in the midst of a recession.
Amy Williamson, assistant financial aid director, says that in the 2009-2010 school year financial aid has given out close to $3 million in student loans.
This is up from $2 million the year before. She added that the number of applicants for the coming school year is higher than last year. The financial aid staff also has to adjust to changes in processing loan requests brought on by the reform.
However, Williamson says this should not raise any alarms for students. The financial aid staff is very experienced and is handling the changes smoothly.
Williamson assures students that they will not see any major changes in the application process
"We are trying to keep everything close to what they have already been experiencing," she said.
The reform was enacted largely due to the criticism that the federally guaranteed loans from private lenders were costing tax payers more than if the government did direct lending. By guaranteeing the loan, the government would repay the lender any losses it might incur for the loan.
By ending this practice and assuming sole responsibility for the loans, President Obama said that the reform will save the American taxpayers $68 billion over the coming years. Obama explained that the savings will be invested in college education.
While the reform has been championed for its benefits, it also has drawn concern.
Williamson said reform was needed but it limits students' financial options
"It's not fair for students, reducing their choices and ability to control their own education," Williamson said.
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