Federal Pell Grant Recipents Will Benefit the Most from the New Student Loan Bill

As May nears and the end of the school year rapidly approaches thousands and thousands of current and prospective college students are anxiously waiting for their financial aid award letters to come in the mail. For nearly sixty-five percent of college students, the financial aid determines their fate; it will determine if they can continue with school in the upcoming year..

On March 30, President Obama signed a new student loan proposal along with the new healthcare reform plan. The new law goes into effect July 1, and it strips banks from funding private loans to families and giving the federal bank the priority to do so.

According to the National Center for Education Statistics (NCES) over sixty-five percent of students receive financial assistance from the government. Within that percentage, twenty-seven percent are recipients of the federal Pell Grant who receive an average of $2,600 a year. As soon as the student loan bill comes to effect, undergraduates can expect about $3,000 more in the financial aid package. Starting July, the average will increase to $5,550.

“Financial aid is always a big issue for me because it’s determines my fate. If I don’t receive enough aid to cover my tuition and housing, then I’d have to withdraw.” says Ashley Martin, 20, a pre-law student at UMass Amherst in Massachusetts. “I don’t know much about the new law but I’m aware I’ll get a better financial aid package this year.”

Prospecting students benefit from the new law the most, as the process of obtaining a private loan will become more efficient because schools will be borrowing money directly from the U.S. Department of Treasury. Both independent and dependent students will be able to apply for private student loans straight from their institution's financial aid office; eliminating the credit checks and possible rejections from national private banks.

“Most of the benefits will be available to future borrowers.” says leading financial expert for FinAid.org (a free online guide about financial aid for students)Mark Kantrowitz. “ Any student that’s in the FFCF program in both new or past loans will benefit of the lower interest rate in the direct loan program.”

The new student loan law does have it faults. Kantrowitz, also says that along with the new direct loan program the chances of obtaining a new private loan will be more difficult as the approval rate will be higher. Private loans are based on the credit of the applicant and most entering college freshman are credit delinquent with a blank credit slate, which will make their chances of scoring a private loan difficult without a credit-worthy co-signer.

“A higher approval rate scares me. I’ve never been lucky with private loans because I have no credit and I don’t know anyone who is in a good credit standing.” says Mark Lowermann, 22, a senior at NYU. “I guess since the Pell grant is increasing, I won’t have to deal with applying for a direct loan or finding a co-signer. So the law really has a benefactor for everyone, it seems.”


Community colleges will also get the benefit of the doubt. The federal bank will invests $2 billion in community colleges across the nation over the next four years to provide better education and career training for citizens eligible for Trade Adjustment Assistance. The TAA program came to effect in 1974, provides aid to both laid-off workers and workers who are struggling with reduced hours and wages courtesy of the increase in imports.

President Obama’s efforts with student loan funding, hit a close to home. During his national campaign for presidency, he announced that he at forty-seven years old had finally finished paying off his student loan debt. By 2020, he hopes that America will once become the most educated nation with the highest percentage of college graduates in the world.

Once the student loan bill comes into effect, 820,000 grants is expected to be distributed to low-income families by 2020. The U.S. Department of Treasury hopes to accomplish this goal by doubling the spending of federal Pell grants

Rebecca Jonnas, the secretary/PR for senator Jeanne Shaheen (D-NH) thinks the new student loan bill will provide greater opportunities for students who otherwise wouldn’t be able to afford college. “[The bill is] providing guaranteed loans for students, rather than leaving it up to chance.”

Chance doesn’t seem like the proper solution in terms of paying for higher education. FinAid.org reports that two-thirds of undergraduates will be $23,186 in debt by the time they complete their four year coursework and earn a Bachelor’s degree. The passing of the new bill couldn’t have come at a better time.