Changes Ahead For College Loan Program 4-08-2010 - WSMV News 4

Changes Ahead For College Loan Program 4-08-2010

Students attending college or parents who have a child in college should be aware of changes in lending programs.

Video: Health Care Reform Means Student Loan Changes

A portion of the recently passed health care reform bill will make colleges and universities switch to a direct lending program.
By July 1, banks will essentially be cut out of the government-backed student loan business. That move will save taxpayers an estimated $68 billion over the next 11 years.
"It's going to hopefully make college more affordable for more families across the country," said Tennessee State University financial aid director Amy Boles Wood.
A large portion of that savings, $40 billion, will go toward Pell Grants that target low to moderate income college students, awarding both larger amounts and more grants.
"We're hoping that more students that maybe hesitated in going to college, or were waiting to try to save money and so forth, might realize that there are funds out there," said Wood.
Historically black institutions like TSU, will receive a slice of a $2.5 billion funding pie over the next 10 years starting this year.
"We are updating our systems so we can start packaging students for fall," said Wood.
The changes are not expected to lower college costs. However, after July 1, students will no longer be asked to shop for commonly used Stafford Loans, thus streamlining the process.
In addition, students who qualify as needy will still be able to borrow money at lower interest rates not to exceed 6.8 percent on those popular Stafford Loans.
Parents could see a savings too. Starting July 1, the public will be able to borrow so called Plus Funds directly from the government.
The federal plus rate is capped at 7.9 percent. Private lenders generally charge up to 8.5 percent.
"I think it's a great thing for students and families," said Wood.
Under the plan, community colleges will also receive $2 billion over the next four years for a training and education grant program.
Also, private lenders can still offer loans that are not backed by the government.
Click here to learn more about the loan changes.
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