The Health Care and Education Reconciliation Act represents a historic investment in higher education. Strengthening the Pell grant program, the new laws will invest in community colleges and historically black colleges and universities, help borrowers manage student loan debt and reduce the federal deficit.
Pell grants were instituted as a national effort to make college affordable. The budgeting process for these grants has lead to funding shortfalls due to the increase of students and workers returning to school. Understanding that, for many students, these grants are the primary source of financial funding, Congress has worked aggressively to increase the maximum Pell award. The HCERA will pay for increased investments in Pell grants by reforming the current student loan programs.
The new legislation ensures that all eligible students receive funding by providing $40 billion more in Pell grants. The bill increases the maximum awarded to students, from $5,550 to $5,975, according to Congressional Budget Office estimates. By the 2020-2021 academic school year, more than 820,000 additional Pell grant awards will result from this new law.
“Many factors are considered for Pell grants and eligibility is determined by the Free Application for Federal Student Aid,” says Melinda Clark, SCAD’s Executive Director of Enrollment Management. The university will award the newly approved amounts for the 2010-2011 academic year.
In the past, the government provided subsidies to financial institutions that would loan money to students at extremely high interest rates. However, on July 1 all new federal student loans will be direct loans, reinvesting these savings in students. The new loans will be awarded and collected by private companies under performance-based contracts with the Department of Education. According to the Congressional Budget Office, “ending these wasteful subsidies will free up nearly $68 billion for college affordability and deficit reduction over the next 11 years.”
“SCAD already participates in the Direct Loan Program, therefore, this part of the legislation will not have an impact on our students,” says Clark.
To ensure students can afford their loan payments, the new legislation affords students choices in how to repay loans through the Expanded Income Based Repayment Program. Beginning with students enrolling in the 2014 academic year, the program limits payment to 10 percent of borrower’s income and forgives any remaining debt after 20 years, 10 years for those who enter public service jobs. This is a change from the previous law, limiting payments to 15 percent of a borrower’s income and forgiving debt after 25 years, regardless of whether one works in public service.
“I think [the Expanded Income Based Repayment Program] will help a lot of people get out of debt in the future, but they need to be held liable,” said Barry Lee, an illustration student. “With the government taking over, it will hold people more liable, because it is a higher power.”
The HCERA, recognizing the importance of HBCUs and minority-serving institutions, will provide $2.55 billion in funding to these institutions. The legislation also includes provisions to provide community colleges with $2 billion in funding over four years.