Written by:
Tatiana Mirutenko

Changes in the financial aid system

If you are a college student with student loans, the health care and education bills will not help you in terms of lowering interest rates. The legislation does not address current and former students who are struggling to pay thousands of dollars of debt. The bill does, however, look into the future and set provisions for students and parents who are interested in seeking financial aid. The financial-aid provisions will be incrementally phased into the existing programs next fall beginning with the replacement of the current government subsidized private lending with a direct system.

This direct system will eliminate the need for private lenders because money will flow through the federal government rather then through private organizations. Annual interest rates will be reduced from 8.5% under the current program to 7.9% under the direct program. The second provision increases funding for Pell Grants, which are available to students from families making $50,000 a year or less. In addition to the increased funding, a newly systemized debt - cap payment system will be introduced to help families and individual students pay back their debt or in some cases totally eliminate a large portion. These provisions alleviate much frustration and anxiety but will their implementation be as effective as the government foresees them to be?

The Wall Street Journal cites that “The changes come as tuition, fees and room and board continue to grow faster than inflation, reaching eye-popping levels at top schools amid state budget crises and declines in endowments.” Prestigious universities across the nation are faced with increasing costs that are being financed by the spikes in not only tuition, but the total cost of a college experience. Despite these provisions in the new health care and education bills, many doubt the effectiveness and overall benefits of the new system. Many student loan packages have been reduced by 25% or even in some cases eliminated. Students and parents are now, more than ever, being faced with the questions of how necessary is it to get an education right now? Should it wait? Am I making the right decision? These are important questions and there is no “right” answer but being informed is a vital part of the process for any individual.

Photo courtesy of Flickr.