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Raises Pell Grants, eases loan repayments, & funds community colleges

Changes paid for by eliminating $68 billion in fees to banks


By Miriam Raftery

April 3, 2010 (San Diego’s East County) – Most Americans don’t realize that the Health Care and Education Reconciliation Act signed into law on March 30th by President Barack Obama affects more than the health care industry.  It also brings sweeping change to the federal student loan program. Obama termed this “one of the most significant investments in higher education since the G.I. Bill.”

Under the new law, the federal government will stop paying fees to private banks to act as middlemen on loans to students. The measure will save the U.S. government nearly $68 million over the next 11 years—money that will be invested in more Pell Grants made directly to students.  The new law will also make it easier for students to repay loans after graduating. In addition, $2 billion will be invested in community colleges for education and career training programs.


“For almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks,” President Obama said, faulting lobbyists for the deal which resulted in money “spent padding student lenders’ pockets.”

Since taking office, the President has doubled Pell Grant funds through stimulus funds, general budget increases and this bill. Pell Grants are made to eligible low-income students.  The new law will provide 820,000 additional students with grants by 2020, also raising maximum Pell Grant amounts from $5,550 to $5,975 by 2017.


Besides helping students with federal Pell Grants, the bill also eases requirements for repayment of student loans.  After 2014, graduates will not have to pay back more than 10% of their income above basic living requirements (down from 15% currently required). If they make their payments regularly, any remaining debt will be forgiven after 20 years (instead of 25)—or after 10 years if  a graduate works in public service such as nursing, teaching, or the military. For more information on the income-based repayment program, visit


“In the United States of America,” the President said in January, “no one should go broke because they chose to go to college.”

The bill's education provisions have been applauded by many educators, students and their families, but criticized by bankers, Republican National Committee, and Fannie Mae, which said the measure may cost 8,500 jobs in the lending industry.

Among San Diego’s representatives, Republican Congressmen Brian Bilbray, Duncan Hunter and Darrell Issa voted no on the reconciliation measure, while Democratic Congressional members Bob Filner and Susan Davis voted yes. California Senators Dianne Feinstein and Barbara Boxer, both Democrats, also supported the reconciliation measure on healthcare and education reforms.



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