Health Care and Education Reconciliation Act affects student loans

The Health Care and Education Reconciliation Act, which amended the recent major health care legislation, the Patient Protection and Affordable Care Act, made noteworthy changes to student financial aid.

The Department of Education will become the sole originator of all Stafford, PLUS, and federal consolidation loans as of July 1. Traditionally, many banks and other financial institutions have offered these loans with the federal government as the guarantor. According to the Congressional Budget Office, the new approach will help the federal government save $61 billion over 10 years. The savings will finance some of the other changes to student financial aid and higher-education policy.

Borrowers who qualify for the Income-Based Repayment program will see changes in 2014. The program is for borrowers who would have to pay more than 15 percent of what they earn above 150 percent of the federal poverty level to pay off their loans in 10 years. The program now caps loan payments at 15 percent of income above 150 percent of the poverty level and forgives loans after 25 years. Starting July 1, 2014, the program will cap loan payments at 10 percent of income above 150 percent of the poverty level and forgive loans after 20 years.

The Health Care and Education Reconciliation Act also allocates more money for Pell Grants for undergraduate students, for federal grants to support historically black colleges and universities—which include Tuskegee University—as well as other educational institutions that serve minorities, and for federal grants for worker training programs at community colleges and similar institutions.