In a bill that is suppose to address the current health care issues facing the country there are a few surprises for debtors struggling under the weight of student loans. As of July 2010, all new federal student loans will be issued directly from the U.S. Department of Education, cutting out banks as middle-men. This doesn’t mean that private bank loans will disappear totally; but they may simply be relegated to filling in the cost gap that often occurs when students reach their annual federal student loan limits.
Also, fewer students may take out loans or take out smaller loans as the federal Pell Grant program will receive an infusion of $40 billion. And starting in 2013, the Pell Grant award will be tied to the consumer price index, adding on a cost of living increase. And according to some estimates, this may raise the maximum Pell Grant size to $5,975. With an increase in grant money, students may take out fewer student loans ultimately decreasing their level of indebtedness after graduating.
And finally, beginning in 2014, debtors in the income-based student loan repayment plan will have their monthly payments capped at no more than 10 percent of their discretionary income. Currently, the income-based student loan repayment plan’s monthly payments are capped at 15 percent of a debtor’s discretionary income. And that won’t be the only change to the income-based student loan repayment plan. For debtors who remain current on their student loan payments through the income-based plan, their remaining debt will be forgiven after 20 years, five years shorter than the current 25 year period before forgiveness. For public service workers such as teachers, nurses and military personnel, their student loan debt will be forgiven after 10 years.