college

Financial aid changes in health reform law

"Under the current system, schools, not students, decide which loan program to participate in, which means parents and students were paying 8.5 percent if their schools used FFELP while those at Direct Loan schools paid 7.9 percent," says Asher. "Now, everyone will pay the lower rate."

Critics argue that the savings gained by eliminating FFELP will be tempered by a significant reduction in the number of private lending institutions willing to make student loans. Because banks make the majority of their money originating federal loans, the absence of those funds could cause many banks to pull out of the student lending market entirely, dramatically reducing the available options for students in need of private loans.

"We've already seen a lot of the largest players getting out and the market is definitely going to get a lot smaller," says Kantrowitz. "More smaller lenders could start making student loans, but it could be harder to get a (private) student loan in the future than it is now."

Other improvements

Students of the future will also have better terms on their federal student loan repayment plan. Beginning in 2014, new students enrolled in income-based repayment (a relatively new option) will have their monthly student loan bills capped at 10 percent of their discretionary income (which is still defined as any income above 150 percent of the poverty line) rather than the current 15 percent rate. The new legislation will also shorten the forgiveness time on loans in the federal income-based repayment plan from forgiveness after 25 years of consecutive payments to 20. Because the provisions aren't retroactive, they will only affect new borrowers taking out new loans after 2014.

The new legislation also allocates approximately $2 billion in grants to community colleges, $750 million to the College Access and Completion Innovation Fund, which provides need-based grants for low-income two-year college students, and $2.6 billion for historically black colleges and universities.

"For students and families, this is all good news," says Asher.

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