President Obama Signs Student Loan Reform: ‘A great battle pitting the interests of the banks and financial institutions against the interests of students has finally come to an end.’
Since President Obama was sworn into office, he has worked to lay a new foundation for the economy by focusing on health care and education. Last week's signing of historic health reform was a huge step forward -- and today, the President signed legislation that improves on last week's bill as well as investing in higher education and bringing meaningful reform to our student loan system.
The Health Care and Education Reconciliation Act signed today makes a number of key investments in higher education, while at the same time putting an end to a system that used taxpayer money to subsidize private bank loans to students. It reinvests those $68 billion in savings toward making college more affordable, as well as reducing the deficit.
Speaking at the Northern Virginia Community College this morning, President Obama explained how this helps students by ending subsidies for private lenders:
“What’s gotten overlooked amid all the hoopla, all the drama of last week, is what happened in education -- when a great battle pitting the interests of the banks and financial institutions against the interests of students finally came to an end.
You see, for almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks to act as unnecessary middlemen in administering student loans. So those are billions of dollars that could have been spent helping more of our students attend and complete college; that could have been spent advancing the dreams of our children; that could have been spent easing the burden of tuition on middle-class families. Instead, that money was spent padding student lenders’ profits.
Now, it probably won’t surprise you to learn that the big banks and financial institutions hired a army of lobbyists to protect the status quo. In fact, Sallie Mae, America’s biggest student Cheap Accutane lender, spent more than $3 million on lobbying last year alone.
...By cutting out the middleman, we’ll save American taxpayers $68 billion in the coming years -- $68 billion. That’s real money -- real savings that we’ll reinvest to help improve the quality of higher education and make it more affordable.”
Here are some of the highlights of what the Health Care and Education Reconciliation Act will do to help students and families:
- Double funding for Pell Grants since President Obama took office, to ensure that all eligible students receive an award, and that grants keep pace with the rising cost of college
- Invest in community colleges to help an additional 5 million Americans earn degrees and certificates over the next decade
- Increase support for historically black colleges and universities and minority serving-institutions, which have been particularly hard hit by some of the challenges facing all universities, and account for nearly sixty percent of the 4.7 million minority undergraduates in our country.
- Ease loan repayment by capping student loan payments at 10 percent of a graduate's discretionary income, with any remaining balance forgiven after 20 years. And those who go into public service after graduation can have their loans forgiven after 10 years.
- End government subsidies given to financial institutions that make student loans, switching to direct loans. This saves nearly $68 billion for college affordability.
In his remarks this morning, President Obama also asked Dr. Jill Biden, a longtime educator and professor at Northern Virginia Community College, to host a summit on community colleges at the White House this fall. The summit will bring together a range of students, educators, and experts to come up with solutions to help students earn degrees and credentials, forge private sector partnerships, and better prepare America's workforce.
Dr. Biden recorded a video on how the bill will help students and their families: