Office of the Vice President for Global Communications

Tuesday, April 6, 2010

Education provisions part of federal budget reconciliation bill

While most attention was focused on health care reform, a number of educational provisions also were enacted into law when President Barack Obama signed the Health Care and Education Reconciliation Act of 2010 bill last week.

Many of the provisions are similar to those contained in the Student Aid and Fiscal Responsibility Act, which passed the House last fall.

The new law requires all schools that participate in the federal student loan program to switch to the federal Direct Loan Program from the private bank-based federal loan program. This switch generates nearly $61 billion in savings, which are used to fund the other education initiatives in the new law. The legislation also includes technical assistance for institutions making the change. Since U-M was one of the first schools to use the direct loan program, this switch will not affect how our students receive their loans.

The law provides $36 billion for Pell Grants to protect against possible cuts in the maximum award in the short term, and provides for inflationary increases to the awards in future years.

It also provides $2.55 billion to continue investment in historically black colleges and universities, Hispanic-serving institutions and tribal colleges; and $2 billion to fund the Community College and Career Training Grant Program.  Additionally the new law provides $750 million to continue funding for the College Access Challenge Grant Program, which provides formula funding to each state to bolster college access and completion programs.

There is one additional change that begins in 2014. The law expands the Income-Based Repayment Program so that borrowers with loans made on or after July 1, 2014, will see their monthly payments reduced to 10 percent of their discretionary income and have their loan balance discharged after 20 years. Currently the payment-reduction benefit is 15 percent after 25 years.

For more information, contact Cindy Bank, assistant director, U-M Washington Office at bankc@umich.edu.