How do students benefit?

March 31, 2010 at 12:00a.m.

Associated Press

WASHINGTON

The law that President Barack Obama signed Tuesday could mean big changes for students and colleges.

Q. What does the overhaul of student lending do?

A. Basically, it cuts banks out of the government-backed student loan business.

Under the changes, banks will no longer act as middlemen, and all colleges and universities must switch to the direct-lending program by July 1.

Q. How much money will the government save?

A. Taxpayers will save $68 billion over the next 11 years, according to the Congressional Budget Office.

Q. OK, what exactly is happening to Pell Grants?

A. More than $40 billion will go toward the grants. Between 2013 and 2017, the maximum award will increase to $5,975 from $5,550.

Q. How else will students benefit?

A. Students who have low incomes or meet certain other eligibility requirements and who take out loans after July 1, 2014, will see their payments limited to 10 percent of their discretionary income after graduation. Current law caps payments at 15 percent of income.

For students who make their loan payments on time, the government will forgive the balance after 20 years, instead of 25.

Q. What’s in the new law for community colleges?

A. Community colleges, which enroll more than 6 million students and are growing fast, will receive $2 billion over the next four years for a competitive grant program to provide training and education programs.