College students already use federal student loans to pay for everything from tuition and books to housing. Image from Flickr.

Tucked inside the health care reform bill that congress passed on Sunday was a bill that will reform the student loan system. Focused mainly on how student loans are administered, the student loan bill will create $61 billion in savings over 10 years. Of those savings, $30 billion will be put back into education, while another $10 billion will go to deficit reduction. Banks and financial institutions will no longer act as the money lender on these loans — instead, the Department of Education will administer the loans.

Student loan bill changes administration

The biggest change that the student loan bill will implement is in how the student loan program operates. Currently, Congress sets eligibility rules, interest rates and most of the rules about how student loans are administered. The Department of Education then works with lenders like Sallie Mae and colleges to help students apply for the low rate personal loan.

The lending institution then distributes money to the school. The lending institution receives subsidies from the government for providing this service. The student loan bill will simply cut out government subsidies for lending institutions. Instead, the Department of Education will act as the lending institution. Just by cutting out subsidies, the government will save approximately $6.1 billion a year.

Reinvesting in education through the student loan bill

With the savings of the student loan bill, the Department of Education will be able to reinvest about $30 billion back into education. According to the student loan bill, this money will be used to increase the maximum Pell Grant, which is used to help low-income students pay for college. The bill will also reduce the monthly payments that some students have to make on their loans, which will help make college more affordable for more people.

Criticisms of the student loan bill

Even though this bill saves the government billions of dollars a year and reinvests in education, there are criticisms. The costs of college have been rising at double-digit percentages each year, and the increase in the Pell Grants will not come anywhere close to covering that increase in cost. There are also fears that by cutting out the loan industry, the government will effectively be cutting jobs. However, most estimates say that comparatively few — if any — jobs will be lost, as the government will need to hire personnel to administer the loans. Finally, some worry that interest rates on these unsecured personal loans will begin to rise. However, the student loan bill does not change the fact that Congress sets the rules, eligibility and interest rates for student loans.

Sources:

Columbia Spectator
Campus Progress
The New York Times

Each year, parents and students search for financial aid resources to help pay for college costs. While it can be overwhelming to think about, particularly when prior financial preparations have not been made, financial aid for college can be a life saver. Financial assistance for college can be acquired through grants, loans, and work-study programs, which help students to work while paying for school.

Educational grants

The Pell Grant is one of the most popular forms of financial assistance for undergraduate students. With a Pell Grant, students may receive up to approximately $4,050 that does not have to be repaid. Another popular federal grant is the Supplemental Educational Opportunity Grant (SEOG), which is available for undergraduate students who can demonstrate extreme financial need. With SEOGs qualifying students may receive up to $4,000 for each year they attend.

College scholarships

Scholarships are another option for financing a college education. Like grants, scholarships do not have to be repaid. However, scholarships differ from government grants in that they are awarded based on specific academic criteria. If students who receive scholarships fail to continue satisfying the minimum requirements, usually include a specified grade point average or participation in a sport or other activity, scholarships can be withdrawn.

Compared to the relatively few government options for educational financing, scholarships are available and numerous and a student can often qualify for more than one at a time. Scholarships are generally awarded by non-profit organizations, and there are literally thousands of them. Students can apply for more than one scholarship at a time and, if enough scholarships are received, they can cover the entire cost of a student’s college education.

Plan ahead

No matter how you pay for college, it’s best to begin exploring options and making investments as early as possible in a child’s pre-college education. Financial aid, grants, and scholarships are widely available, but it’s a good idea to apply for them before the student actually needs them. Most students wait to apply for federal financial aid until they’re seeking admission to a college or university. Very few are aware that applications for government aid can be made ahead of time. In fact, it’s recommended that anyone considering applying for government-sponsored financial aid should apply sooner, rather than later because aid is awarded on a first-come, first-served basis. It is advisable to begin applying for government aid in January of the year that a student intends to commence his or her college education.

A necessary luxury

Attending college is a luxury, there’s no arguing with that.  In terms of both career opportunities and personal achievement, however, a higher education is also something of a necessity. Although a college education is an expensive undertaking, financial assistance is available and should be utilized whenever possible. For further information and answers to questions about college financial aid, visit the Department of Education website at www.ed.gov. For help finding scholarship opportunities, visit www.fastweb.com, which maintains a database of more than 175,000 available scholarships.

If you’re in college or have a child who is, you know all too well how expensive it is to get a degree or diploma these days. Tuition, books, computers, housing, food, transportation – it all adds up to a boatload of money. If you’re eligible for a student loan, getting one can make a huge difference in your ability to afford a good education. Student loans have to be paid back, however, which can strain your finances after graduation, especially if you don’t land a good-paying job right away.

Grants are essentially free money

Before you start school, find out whether you’re eligible for a federal or state grant in addition to a loan. The great advantage of a grant is that it’s yours to keep, so long as don’t drop out of school when you’ve already received your money for that semester. Educational grants are based on financial need, of course, and not everyone can qualify for one. Even if you qualify, you can miss out if you don’t apply early, because there are only a certain number of grant dollars available each year.

Federal Pell grants

The Pell program accounts for the lion’s share of the student grants issued in the United States. Each college in the Pell system receives grant funds that it distributes to eligible students. Depending on your income and the availability of funds, your Federal Pell grant could be anywhere from a few hundred to several thousand dollars a year.

If you’re a science, math, or social science major and are receiving a Pell grant, you might also qualify for an Academic Competitiveness grant worth up to $750 in the first year of your academic studies, and $1300 in the second year. Third- and fourth-year math and science majors can apply for a National SMART grant that pays up to $4000 a year.

Federal Supplemental Education Opportunity grants

If you’re a student with demonstrable economic hardship, ask your campus financial aid office about Federal Supplemental Education Opportunity grants. Students who qualify stand to receive from $100 and $4000 a year.

State student grants

Each of the 50 states offers a variety of educational grant programs. Most states try to help low-income students who perform well academically by awarding grants based on a combination of their individual financial needs and GPA scores. Many states also offer grant money or loans with concessionary terms to students who are studying specific subjects or who belong to certain minority groups.

For example, if you get an education degree in California, you could have your loans reduced by as much as $19,000 after you graduate if you work in a low-income area, or teach a subject for which there aren’t enough teachers. In many parts of the country, there are grants specifically designed for adult students who didn’t get a college education in their youth, for disabled students, and for African-Americans, Hispanics, and Native Americans.

Your state government offices or student-aid website will have details about the state grants that might be available to you. In many cases, you can apply for student aid online.

Institutional grants

Many colleges administer privately funded grant programs. In additional to serving as a form of supplementary aid for needy students, institutional grants are sometimes used by colleges to attract students with exceptional academic records or athletic abilities. If you think your amazing athletic skills or perfect math scores may be of interest to a particular school, check to see whether the school has an institutional grant program that applies to you.