WASHINGTON, D.C. – This week President Obama signed the Health Care and Education Reconciliation Act of 2010, which delivered a significant down payment on the President’s ambitious agenda to make higher education more affordable and help more Americans earn a college degree.
This legislation strengthens the Pell Grant program, invests in community colleges, extends support for Historically Black Colleges and other Minority Serving Institutions, and helps student borrowers manage their student loan debt by capping repayments at 10 percent of their discretionary income. These efforts will be fully paid for by ending the government subsidies currently given to banks and other financial institutions that make guaranteed federal student loans and free up nearly $68 billion for college affordability and deficit reduction over the next 11 years.
“For a long time, our student loan system has worked for banks and financial institutions,” President Obama said. “Today, we’re finally making our student loan system work for students and all of our families.”
“This legislation is a win for students and parents struggling to make ends meet to fulfill the dream of a college education,” Education Secretary Arne Duncan said. “By ending subsidies to banks, we can make important investments that increase affordability and access to our nation’s universities and community colleges.”
This historic law:
- Invests more than $40 billion in Pell Grants to ensure that all eligible students receive an award and that these awards are increased in future years to help keep pace with the rising cost of college. These investments, coupled with the funding provided in the Recovery Act and the President’s first two budgets, will more than double the total amount of funding available for Pell Grants since President Obama took office.
- Ensures that Americans can afford their student loan payments by expanding the existing income-based student loan repayment program. New borrowers who assume loans after July 1, 2014, will be able to cap their student loan repayments at 10 percent of their discretionary income and, if they keep up with their payments over time, will have the balance forgiven after 20 years.
- Includes $2 billion over four years for community colleges to develop, improve, and provide education and career training programs. President Obama also asked Dr. Jill Biden to host a White House Summit on Community Colleges this fall to provide an opportunity for community college leaders, students, education experts, business leaders, and others to share innovative ways to educate our way to a better economy.
Starting July 1, all new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the Department of Education. According to the non-partisan Congressional Budget Office, ending these wasteful subsidies will free up nearly $68 billion for college affordability and deficit reduction over the next 11 years.