Big bank subsidies go away with new federal student loan program

On July 1 getting government loans for college changed for the better. All federally guaranteed student loans are now issued directly through the Department of Education. Earlier this year, bank lobbyists were outraged when a measure ending their student loan racket was added to the health care reform bill. The government has removed banks as the middleman for federally guaranteed student loans, and ended the billions of taxpayer dollars in subsidies paid to banks for pushing paper on those loans.

Article resource: Federal student loan move ends taxpayer gravy train for big banks by Personal Money Store

Federal student loan overhaul saves taxpayers billions

The end of student loan subsidies for big banks will create $ 68 billion in savings over the next 10 years, as outlined by government estimates. The Federal Direct Loan Program (FDLP) will offer all new loans through colleges and universities beginning July 1. The FDLP, the government says, will be a more reliable lender for students and a better value for taxpayers.

Federal student loans – what changes?

All new government loans for college are now issued directly through the Department of Education’s Direct Loan program. USA Today reports that the FDLP eliminates the Federal Family Education Loan Program (FFELP), which had allowed banks and other commercial lenders to offer federally guaranteed loans. Both subsidized and unsubsidized Stafford Loans for undergraduate and graduate students, also as PLUS (Parent Loan for Undergraduate Students) for parents and PLUS loans for graduate and professional degree students are affected by the change.

Scholarships take the place of bank profits

Money saved by ending commercial bank subsidies for government college loans goes to the Federal Pell Grant program. Pell Grants are scholarships given to students from lower-income families that don’t have to be paid back. Native Times reports that beginning this fall the maximum Pell Grant amount increases by $ 200 to $ 5,550, where it will remain until 2013-2014.

Students must do their part now

Now to get a federal student loan applicants must file electronic forms accessible at studentloans.gov. Kenosha news reports that colleges and universities are under pressure to meet their responsibility to process the volume of student applicants. Financial aid directors are advising students and/or their parents to contact their college's student financial aid office with questions sooner, rather than later.

More information accessible at these sites:

usatoday.com

nativetimes.com

kenoshanews.com