Pell Grants – More Funds, Easier Repayments Now Available

Recent Changes Will Work in Students’ Favor

Pell Grants, the federal government program which gives financial assistance to low-income families whose children attend college, changed in several significant ways with the passage of the healthcare bill.

In short, the Department of Education has stepped forward to take over the student loan process.   Why?  The U.S. government was paying billions of dollars in annual subsidies to banks and private lenders to award Pell Grants then operate and manage the loan and collection process.  The new law provides that as of July 1, 2010, all federal student aid loans will derive from the Federal Direct Loan Program.  Simultaneously, the Federal Family Education Loan (FFEL) Program has been shuttered.     

The Congressional Budget Office (CBO) says that while shifting the loan process away from the private sector and eliminating paying subsidies to them that America’s taxpayers will save $61 billion in the next decade.  It is the CBO’s plan to put $10 billion of the savings toward reducing the federal deficit while nearly $36 billion will be rechanneled into Pell Grants for students and families.  The new process will, in 2017, permit the Pell Grant maximum awarded amounts to increase to $6,000.00 annually, up from the current $5,500.00, a jump of $2,000.00 over a four year college career. 

Perhaps more importantly, students and parents will be dealing with one secure lender instead of facing the uncertainty accompanied with their loans being passed along to new lenders, as is common with private lenders and banks, or wondering if those holding their loans will be in sound financial condition in the event of another economic downturn.  A number of other benefits, according to the COG, are in place with the new legislation.  For instance, in 2014 borrowers will have better repayment options including holding their monthly payments to no more than 15% of their income. 

The Federal Pell Grant Program awards grants to America’s neediest college students. This year alone the Department of Education will bestow nearly $32 billion in Pell Grants to approximately 8.4 million U.S. students.

The federal government still faces the chore of choosing who will manage their clients’ accounts and their choices will come from the private sector.  The management contracts for individual accounts will be awarded based upon what appears to be an as yet to be determined list of criteria linked to customer service and assistance. 

U.S. Secretary of Education Arne Duncan said, “These changes will expand educational opportunities for millions of students and families and will make it easier for them to pay for college.”