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Student Loan Reform

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Student Loan Reform revamped the federal student loan process by changing how loans are granted and repaid.

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Student Loan Reform was taken from a bill called the Student Aid and Fiscal Responsibility Act of 2009 (SAFRA).[1] The text of this bill was added as a rider to the Health Care and Education Reconciliation Act of 2010,[2] an amendment to the Patient Protection and Affordable Care Act[3] and the Higher Education Act of 1965 (HEA).  The act was signed into law on March 30, 2010 by President Barack Obama

The federal student loan process was revamped with the Student Loan Reform.  A major change was removing the Federal Family Education Loan (FEL) Program[4], also known as FELP.  FELP had banks as the middlemen.  The government was paying commerical banks to act as an intermediary between the government and student.[5]  With the removal of this program, all new Stafford, PLUS, and Consolidation loans are now available from the U.S. Department of Education Direct Loan program.[6]   This regulation came into effect on July 1, 2010.

For the Federal Pell Grant program, which provides need-based grants to low-income students, the Student Loan Reform both increased the amount of money available per grant and also increased the number of grants offered.[7]

The Student Loan Reform changed the policy of consolidating federal student loans so that consolidation will be possible while the student is still in college.  Previously, students would only have the opportunity to consolidate the various federal student loans after graduation.[8]

Additionally, the Student Loan Reform added amendments to the new Income-Based Repayment (IBR) plan, where federal student loan borrowers who have a high debt relative to their income could have their monthly payments capped to less than 10% of their gross income for 25 years. There were major flaws in the plan where certain borrowers were required to make higher monthly payments than they should have.  An example of this is married couples, where the IBR program would calculate the monthly payments based on the joint income, not taking into consideration that both individuals might have federal student loans.[9]


  1. http://hdl.loc.gov/loc.uscongress/legislation.111hr3221
  2. http://hdl.loc.gov/loc.uscongress/legislation.111hr4872
  3. http://hdl.loc.gov/loc.uscongress/legislation.111hr3590
  4. http://www2.ed.gov/programs/ffel/index.html
  5. http://www2.ed.gov/offices/OSFAP/DirectLoan/index.html
  6. http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloansupdate.jsp
  7. http://www2.ed.gov/programs/fpg/index.html
  8. http://www.businessweek.com/bschools/content/jul2010/bs2010078_518032.htm
  9. http://www.ibrinfo.org/update_July12010.vp.html

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