Law makes government the primary lender.
By Darlene Superville
WASHINGTON - Bigger grants for low-income college students. Relaxed repayment terms on student loans. More money for community colleges and historically black institutions.
The law that President Obama signed yesterday - cutting banks out of the government-backed student loan business - will mean big changes for hard-pressed students and colleges.
The new law, part of a package that also includes fixes to the health-care overhaul, makes government the primary issuer of student loans.
It eliminates fees paid to private banks to act as intermediaries in providing student loans and will use much of the projected $68 billion in savings over 11 years to expand Pell Grants for low-income students and make it easier for students to repay loans after graduating.
The size of Pell Grants will increase along with inflation, and by 2017 should raise the maximum grant to $5,975 from $5,550, according to the White House.
The law will also provide 820,000 more grants by 2020.
Students who have low incomes or meet certain other eligibility requirements and who borrow money after July 1, 2014, will be allowed to cap their repayments at 10 percent of their income above basic living requirements, instead of 15 percent.
If they keep up their payments, they will have any remaining debt forgiven after 20 years instead of 25 years - or after 10 years if they are in a public service, such as teaching, nursing, or serving in the military.