Federal bill tightens up bank lending programs
April 19, 2010
by Jamie Santiago | Staff Writer
As an incentive to help students pay loans after graduation, the federal student loan program is changing, doubling the Pell Grant program and making sure private banks no longer issue student loans.
President Obama signed legislation March 30 for the Education Reconciliation Act of 2010. The law will save taxpayers approximately $68 billion, by cutting out banks as middlemen, the president said. This piece of legislation will also end government subsidies to banks. Instead, private companies under contracts with the Department of Education, will directly provide loans to college students.
Expanding Pell grants will help make college affordability by increasing individual grants to almost $6,000 by 2017. By 2020, 820,000 more will be added, according to Obama.
According to Financial Aid Supervisor Kimberly Cortijo, the financial aid office at City College is preparing for the upcoming changes.
“The Sacramento City College Financial Aid Office has been aware of these upcoming changes for many months now,” Cortijo said. “And because we expected that this legislation would become law, we have been preparing to make the transition from the Federal Family Educational Loan Program to the Direct Loan Program so that our students will continue to have access to student loans.”
The biggest change for students will be that they no longer have a choice of lenders to select from since they will receive loans directly from the Department of Education, Cortijo said.
According to Cortijo, the loan application process will also change, but details have yet to be finalized.
Students will have access to all facts regarding this program no later than July 1, when the law goes into effect, Cortijo said. The eligibility requirement for loans will remain unchanged; however, the benefits of borrowing may differ compared to what students may be receiving from their current lender.
“I support it. I think that’s good,” said business major Tiano Mason. “It will save me a lot of money when I get up out of here.”