New loan law ‘great’ for MSU students
The Bozeman Daily Chronicle
The new college student loan law passed by Congress last week will affect the 60 to 70 percent of Montana State University students who take out student loans.
“This is going to be great for students,” Brandi Payne, MSU financial aid director, said.
Under the new law, which was attached to the major health insurance bill, the U.S. Department of Education will make all loans directly to students, instead of providing subsidies to private banks to make college loans.
Money saved on subsidies, an estimated $61 billion over 10 years, will go towards increasing Pell grants for low-income students and making it easier for students to pay back their loans after graduating.
In anticipation of the bill being passed, MSU was gearing up to return to the federal direct-loan program, starting in May with the summer session.
“We got an early start,” Payne said. “We were on federal direct lending before and it is an excellent program. And because we transitioned and made the change early, I don’t think our students should expect any delays.”
Most students won’t see much change, Payne said. One difference is that all student borrowers will have to sign a new promissory note, promising to repay their loans. Students or their families will still have to fill out the complicated federal FAFSA form to apply for financial aid. “These changes will be pretty seamless to students,” Payne said.
MSU students having lunch in the Union Market last week hadn’t heard much about the new law. Joshua Moore, a sophomore in mechanical engineering, said he was “kind of neutral” about the changes. “I have to pay somebody back anyways.”
Christie Blaskovich, a biochemistry and French major, said she had heard Pell grants would increase. And while that wouldn’t affect her, she said, “I think it will be great. I think it will be helpful for more people to get an education.”
Under the new law, Pell grants will be tied to inflation. The maximum grant of $5,350 this year will rise to $5,975 in seven years, though that’s less than the inflation rate for tuition.
Another change brought on by the bill is that starting in 2014, graduates will be able to cap their student loan payments at 10 percent of discretionary income, instead of 15 percent, Payne said.
Loan repayments will be forgiven after 20 years of ontime repayment, rather than 25 years.
The law will also provide several billion dollars to aid community colleges, tribal colleges and historically black colleges; to cover a shortfall in the current program; and to reduce the federal deficit.
Concerns have been raised nationally that the U.S. Education Department will have a hard time processing millions more student loans, which could cause delays, similar to the delays returning Iraq War veterans experienced with GI Bill payments when the veterans agency struggled with a glut of new vets.
“We’ve been assured by the Department of Education they are prepared,” Payne said.
The bill also allows nonprofits to service direct loans, which is positive, she added. That opens the door for Montana nonprofits like the Student Assistance Foundation, which provides “very good service at the local level,” she said.
Congressional supporters of the new law argued that it would keep graduates from being crushed by student loan debt. Democrats contended that in the old loan system, the federal government took nearly all the risk, while banks reaped subsidies at the expense of taxpayers and students. Republicans and other critics of the new law argued it’s a government takeover, will eliminate thousands of private-sector jobs and students wouldn’t get the same kind of service.