The New Student Loan Bill: How Will It Affect You?

My first response when I heard that Obama had tacked a student loan bill onto the health care bill was, "Oooo, sneaky!" (spoken out loud at my desk to no one in particular). It was like biting into a chocolate and finding caramel inside. In all the hullaballoo of health care reform, I doubt I was the only one who had forgotten--or at least assumed that Obama had forgotten--the promise he made in his first State of the Union Address: "In the United States of America [pregnant pause] no one should go broke because they chose to go to college."

There is no doubt that something needed (and still needs) to be done to make college more affordable. Going to college keeps getting more and more expensive, and repaying student loans is no easy feat. As Susan L. Travis puts it:

The stick-to-itiveness of the student loan permeates even the extent to which one can become accredited in one's field, for often, accrediting boards deny licenses or license renewals to a host of medical and legal professions based solely on their student loans. Not so funny...all that work and debt to pursue the American dream, only to be turned away at the door of one's best hope to repay the debt.

Travis also makes the important point that even declaring bankruptcy won't erase your student loans. They're just there: an elephant too fat and stubborn to push out of the room.

Yet, it's not entirely clear how much the new student loan bill actually changes things, particularly when it comes to those it helps--the students. How different is applying to student loans now? Is it easier? Harder? Will you get more money? Less? What will repayment programs look like? If you're a student taking out loans, here are the actual changes under the new bill, in order of when they will impact you:

There will be more Pell Grants.

This is, no doubt, the biggest news. The White House will give out 820,000 more grants by 2020 as part of a larger effort to increase grant availability. Moreover, the FAFSA overhaul last year made it significantly easier to fill out the form itself, in the hope that more students who were qualified would apply. And in response to far fewer questions and the ability to automatically populate financial information from tax records, the number of students who submitted the form has in fact gone up significantly: 21 percent this year.

The maximum Pell Grant gift amount will also rise.

The amount awarded will rise along with inflation from $5,550 to $5,975 by 2017. Of course, college tuition has been rising far faster than the rate of inflation, meaning the extra $425 hardly closes the gap between grant and cost.

Your university will issue student loans directly from the government.

In other words, all student loans will go through the school's financial aid office, and you will have to fill out a FAFSA to get any type of financial aid. One-stop shopping! That said, private banks won't be completely cut out the picture, and not only because you'll use them if you need to take out additional loans. According to the Department of Education, Sallie May and others will be kept on to "service" the loans (i.e. do all the administrative work.)

You're only obligated to submit up to 10 percent of your discretionary income after graduation towards paying off your student loans after graduation.

This means your student loan repayments will likely be less of a drain of your entry-level income. The minimum is down from 15 percent, as established by the College Cost Reduction and Access Act of 2007.

Your student loans will be forgiven more quickly.

Under the new bill, your loan will be forgiven after 20 years (down from 25, again from the 2007 Act) for most and after 10 if you take a job in public service.

So there you go. Better than a quick in the head, not as wonderful as one might have hoped.

--Posted by Madison Priest