President Obama signed the Health Care and Education Reconciliation Act on Tuesday morning (March 30), after the bill passed in the House last Thursday. Setting aside the complicated health care reform the law tackles, the Student Aid and Fiscal Responsibility Act (SAFRA) included within it is intended to make paying for and completing college more feasible. According to the White House, SAFRA is expected to save taxpayers $68 billion over the next decade while nearing the Obama administration's goal of having the highest percentage of citizens who are college graduates in the world by 2020.
So how, exactly, will the new legislation affect you?
Eliminating Subsidies for Lenders:
SAFRA will eliminate grants given to private banks and other financial institutions who distribute federal student loans. These loans, formally known as the Family Federal Education Loan program, are most commonly referred to as Stafford Loans. The new bill will replace Stafford Loans with lower-interest loans provided directly by the government to students.
Increasing Pell Grants:
A Pell Grant is money given to you by the government that you do not have to pay back. Under the new act, $36 billion will go toward increasing maximum annual Pell Grant scholarships. Students who qualify for financial aid will now be eligible for up to $5,500 (up from $5,350) in grants for the 2010-2011 school year. This figure will increase to $5,975 in 2017.
Strengthening the Income-Based Repayment Program:
The current Income-Based Repayment Program allows borrowers to cap their monthly loan payments at 15 percent of their income. SAFRA will invest $1.5 billion in the existing program to lower this number to 10 percent for new borrowers (recent college grads) after 2014.
Increasing Funding for HBCUs, MSIs and Community Colleges:
Historically black colleges and universities (HBCUs) and other minority-serving institutions (MSIs) will share $2.55 billion to provide their students with the resources and support they need to graduate. Additionally, $2 billion in competitive grants will be offered to strengthen programs at community colleges.
You can access information and resources related to college completion at GetSchooled.com, where you can also watch the "Get Schooled: You Have a Right" special featuring President Barack Obama, LeBron James and Kelly Clarkson.