The new student loan bill has finally been signed by Obama despite the phrases hurled towards the bill such as big government and federal take-over. The new law signed on Tuesday, 30 March 2010 will eliminate the middle man (banks) and also the fees paid to them which will then save $68 billion over 11 years. With this much saving, the Obama administration intents to expand Pell Grants and the law will also make it easier for students to repay their loan.

Beginning in July 2014, students who borrow money will be able to cap their monthly payments up to 10% of their income above the basic living allowance, which before was 15%. For those who work in public service such as teaching and nursing, can have their remaining balance forgiven after 20 years. The government will begin to directly lend to students in July this year.

Students may cheer over this news and they do have solid reasons to do so. However, this solution may not be all that sustainable if somewhere somebody else pays the price for the new law. With the unemployment rate in the US already at 22%, the US should also be concerned with Sallie Mae as the law that has just been signed by Obama is also signing off 2500 jobs that will be lost due to this student loan reform. Looks like the law was only to shift problems from the student loan industry to add more to the unemployment rate problem.

With the whole economy already messed up, it is indeed difficult to avoid victims from falling. In this case, the sacrifice is made by 2500 people who are soon unemployed and also possibly 31,000 private-sector jobs in Tennessee, according to Senator Lamar Alexander, as his state is the home of  big players in the private student loan industry. While the new law may actually help the students a lot, I do not think it will be a permanent solution. With the inflation rising, very soon education cost already enormous now may increase even more. Students will have to get even bigger loans than now and if they can’t pay them off within 20 years, the government will have to forgive them and the burden will be on somebody else again.

Would have been a much better idea to cap education cost so it is more affordable in the first place…

Popularity: 1% [?]

Powered by MightyAdsense