Change in Student Loan Programs

The House voted 253-171 recently to dismantle a major federal student loan program and use the billions of dollars in resulting savings to provide more money to lower-income college students, according to a CongressDaily report. The bill will end the Federal Family Education Loan Program and originate all federally backed student loans through the Education Department's Direct Loan Program. Ending FFEL would be a serious blow to student lenders across the country, many of which rely heavily on business generated from government-backed loans. The bill would restrict the role of loan giants like Sallie Mae and Nelnet to servicing loans from the Education Department. President Obama proposed the change in his FY10 budget request, and CBO estimated it would save $80 billion over 10 years. The plan is cheaper because it ends subsidies to student lenders and because the government can borrow money more cheaply than private entities. However, the House rejected the second half of the Obama proposal, which would have made spending on Pell Grants for the neediest college students mandatory rather than discretionary. The bill passed by the House does increase spending on Pell Grants by $43 billion, upping the annual grant maximum to $5,550 in 2010 and to $6,900 by 2019. The bill also indexes increases in the maximum grants to the Consumer Price Index plus 1 percent.

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By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.