You are here:

Major Student Loan Overhaul in Washington

On September 17th the House of Representatives passed the Student Aid and Fiscal Responsibility Act, a bill that provides billions of dollars in federal spending on education and that makes a major change in the structure for student loans in this country. The omnibus bill is described in the New York Times as a step towards the loan relief that has become a major issue as the cost of higher education has soared.

The principal revision in the loan program is eliminating the current loan option of federally guaranteed loans provided by private institutions. Instead, all federally backed student loans will come directly from the government.

Direct loans from the government currently available are based on need. Any student is eligible for a loan that is guaranteed by the government but issued by a private lender, and these are the large majority of all student loans. The loans originated by banks and other lending institutions are called Federal Family Education Loan Program (FFELP) loans - which currently represent about 75% of all student lending. Students who max out on federally guaranteed or subsidized loans also have the option of taking out private loans from banks to meet further needs.

The new legislation raises the limit on direct student loans and will also increase the ceiling for Pell grants, a program that provides direct grants for higher education to low income students. There are also funds to underwrite community college development and some special education programs.

There are current ceilings on student borrowing, both for total student loans and for annual loans. They vary through the undergraduate years and go up for graduate students. Thus a freshman who wants to pursue a business administration degree is may currently borrow a maximum of $5,500 for that year.

The rate rises annually, and by his senior year he can borrow $7,500 for the year. The ceiling rises again for graduate students. If the borrower decides to pursue a management degree through an MBA program, the ceiling can rise to as much as $12,500 for combined subsidized and unsubsidized loans. Those figures will change under the new student loan structure, but they be finalized in the continuing debate on Capitol Hill

But the big change in this legislation is eliminating private lenders from the federal student loan mix. The current loan procedures require college participation and under the new law, schools will be required to switch to the new lending system by July of 2010. That's an enormous bureaucratic shift for the federal government as well, to be accomplished in less that one year.

This bill is expected to pass the Senate, although there is going to be a loud debate about government intervention, big spending, etc. The Obama administration sees the new legislation as a money-saving device. Without the obligation to buy student loans from private institutions, the White House says there will be an $80 billion savings over ten years, which can underwrite the increased Pell grants to low income students.

Search Schools

Matching School Ads
  • Washington State University

    Get your career started with training from Washington State University.


    • Executive MBA
    • MBA
    Pullman: , Pullman WA
    Washington State University Request Info »
  • University of Maryland at College Park

    Study online with University of Maryland at College Park.


    • MBA - Information Systems & Business Analytics
    • MBA - General
    • MBA - Marketing
    • More...
    College Park: , College Park MD 20742
    University of Maryland at College Park Request Info »
  • University of Southern California - DSW

    The University of Southern California Doctor of Social Work (DSW) online program is designed for experienced practitioners to harness innovative solutions to solve real-world problems.

    Unlike a PhD in social work, which prepares scholars for careers in research and the professoriate, the DSW@USC is an online advanced practice degree program for working professionals who want to have a greater impact in their practice.


    • Doctor of Social Work (DSW)
    Los Angeles: 669 W 34th St, Los Angeles CA 90089
    University of Southern California - DSW Request Info »
  • Pepperdine’s School of Law Master of Legal Studies

    The online Master of Legal Studies program from Pepperdine University School of Law enables nonlawyers from across the United States to develop the legal expertise and credentials to advance within their chosen fields. Students will learn to interpret foundational legal concepts, solve legal challenges, and interact effectively with lawyers.



    • Master of Legal Studies

    Location: Online

    Pepperdine’s School of Law Master of Legal Studies Request Info »
  • Rocky Mountain College of Art + Design

    RMCAD - Where Your Creativity Comes to Life



    • Graphic Design Online
    • Illustration Online
    • Game Art Online
    • More...

    Location: Online

    Rocky Mountain College of Art + Design Request Info »
  • Penn Foster

    Advance your career with our affordable, self-paced, career-focused distance education programs.


    • Home Health Aide
    • Security Guard
    • Veterinary Assistant
    • More...
    Scranton: , Scranton PA 18515
    Penn Foster Request Info »
  • George Mason University

    Located in Fairfax, Virginia, George Mason University is the largest public research university in the Commonwealth of Virginia.


    • Master of Education in Special Education, specializing in Applied Behavior Analysis
    • Master of Business Administration: Business Analytics Specialization
    • Master of Education in Special Education, specializing in Autism Spectrum Disorder
    • More...

    Location: Online

    George Mason  University Request Info »
  • South University, Online Programs

    As a student at South University, Online Programs you will receive the same quality instruction, variety of learning options and level of service found at the campus locations.


    • Nurse Educator (PGC)
    • Nursing (RN to BSN)
    • Specialization in Nursing Informatics (RN to MSN)
    • More...
    Savannah: 709 Mall Boulevard, Savannah GA 31406
    South University, Online Programs Request Info »
  • Liberty University

    100% Online & No Standardized Testing


    • Doctor of Education: Community Care & Counseling: Marriage & Family
    • Doctor of Ministry: Evangelism & Church Planting
    • M.Div: Homiletics
    • More...
    Lynchburg: 1971 University Blvd,, Lynchburg VA 24515
    Liberty University Request Info »
  • Platt College

    Turn your talents into a career at nationally recognized and accredited Platt College.


    • Veterinary Technology Alternate Route - Certificate
    • Respiratory Therapy
    • Veterinary Technology - Associates

    Location: Online

    Platt College Request Info »
  • Matching School Ads

    Quick School Search

    College & Career Search Tools

    • Careers: Unsure about your career path? Study profiles of hundreds of professions.

    • Interviews: Professors and deans sit down with our team to give you unique insights on college life.

    • Military Education: Find only Military friendly online schools and campuses.

    • Student Reviews: Know before you go. Read student reviews on over 2000 accredited colleges. Write your own experience.