The 2010 Healthcare and Education Reconciliation Act: The Facts About Student Loan Reform

President Obama signed the Healthcare and Education Reconciliation Act into law on March 30, 2010. And while the country has been talking constantly about the healthcare aspects of this legislation, many families will be positively affected by the changes going into affect regarding student loan reform for college and graduate school. According to the White House website, "Too many students and families struggle to make ends meet just to fulfill the dream of a college education. And when students are unable to afford access to higher education or graduate with a degree, our economy suffers." That is why congress has made some positive changes to this expensive and daunting financial process that will help future students more easily achieve the dream of a college education. Some of the changes in student aid are listed below; read through to see what this may mean for you.

Increases in the Pell Grant
Federal Pell Grants are usually awarded to students pursuing their first undergraduate degree, are issued from the government, can be combined with other types of financial aid and do not have to be paid back. The current maximum Pell Grant amount (from July 1, 2010 through June 30, 2011) is $5,550. According to the new legislation, this number will increase to almost $6,000 by the year 2017, and the government is allotting close to $40 billion dollars for this program. Unfortunately, this is not a huge jump in numbers in the next 7 years, which is disappointing; however, the numbers are going up, which is a positive change. Considering all of the cuts that have been made in education budgets across the country, any positive growth in numbers is welcome, though may not feel like enough. To find out if you qualify for a Pell Grant and for how much, you must fill out a FAFSA (Free Application for Federal Student Aid) form; click here to get started.

American Opportunity Tax Credit
Another aspect of the new student loan reform is the American Opportunity Tax Credit. The changes to this credit will allow qualified borrowers to claim a tax credit of up to $10,000 over 4 years for tuition and related expenses, such as books. While this is only a fraction of what a college education costs, it is a helpful incentive for those struggling to finance a college education.

Student Loan Payment Caps
Perhaps one of the most attractive aspects of this legislation is the new student loan reform regulations putting caps on how much an individual will have to repay on student loans at one time. Beginning July 1, 2014, new student loan borrowers will have their payments capped at 10% of their income (down from 15%) to insure that repayments aren't crippling the borrower upon graduation. The second change in student aid is that the remaining balance of the loans will be forgiven in full after 20 years of repayments at this rate, and for those who choose to go into public service such as teaching or nursing, or those who join the military, their loans will be forgiven after only 10 years. This means that students can feel less stress to go into a field that may not pay as much as others and still attend a highly-ranked (i.e. expensive) institution in which to train.

Cutting Out the Banks
The government also announced that it will no longer allow banks to issue federal loans; now, only the government itself will be issuing federal loans, cutting out the "middle man" in the process. This alone will free up a projected $68 billion for college affordability and deficit reduction over the next 11 years.

The bottom line is that while these changes are positive, time will only tell whether they will be enough to get more students into college despite the low economy and high rates of inflation. The other downside to these changes is that they will take years to start, so students going to college in the next 4 to 10 years won't receive the full benefits from this legislation. However, if you're a parent like me whose children won't be looking into college for about a decade or longer, these changes could mean more hope and less stress as we plan for our children's educational futures.

Sources:
whitehouse.gov/studentaid
dpc.senate.gov/healthreformbill/healthbill63.pdf
studentaid.ed.gov