Instead of the government paying private lenders to originate federal student loans, the bill would expand a direct lending program that's been in place for more than a decade.
The Congressional Budget Office estimates the change would save $60 billion over ten years.Î¾ That money would go toward erasing shortfalls in the Pell Grant program, and to make sure those grants are adjusted for inflation.
Justin Draeger is with the National Association of Student Financial Aid Administrators.Î¾ He says if the measure becomes law, students who've already received a financial aid package or award letter won't notice much of a difference.
"They may have to fill out one additional form, because they'll now be participating the direct loan program, as opposed to the guaranteed loan program. And they would just want to contact to make sure all their paperwork is in proper order."
Draeger says the bill also sets a new limit on paying back student loans.
"Students and parents in the future would only be paying 10 percent of their 'discretionary' income in paying back their federal student loans.Î¾ That's another big victory for students, who've seen their total student loan indebtedness increase year after year for the past several years."
Several universities in Texas have already announced their intentions to switch to direct federal loans, so they'll be prepared if the bill passes the Senate, and takes effect on July 1.