Quietly inserted into the healthcare bill is an initiative that will reform the nation’s entire student financing market that passed both houses of congress in the beginning of this year. Signed into law on March 23, the first of the changes will come into effect on July 1^st, just in time to impact this year’s seniors as they get ready for college in the fall. These new guidelines makes the former policy for student loans established in a 1965 law obsolete, while innovating the system and saving the government billions of dollars, it also helps students achieve the ultimate goal of receiving a college degree without an overbearing load of debt.

The most controversial aspect of this new law is the unprecedented government intervention into the banking market. The government will become the sole provider of student financing before the start of the next school year. Before the bill passed, private banks were subsidized by the federal government to loan money to students; with the government assuming all of the risk should someone default on their payments. Now however, the money that used to subsidize the banks is being largely reinvested into Pell grants and other scholarship programs. The role of private banks hasn’t been completely eliminated though. Financial establishments will be for the most servicing the new government loans. This will make the process of getting loans easier as student will no longer have to search for the best interest rates between lenders and with private banks servicing the loans the transition will be smooth.

In the short term, the bottom line on students’ interest rates won’t be changing much. What makes the new program better than the previous system is mainly the new repayment policy. The cap on loan repayments is currently at 15% of a student’s income. Under the new law the cap will be lowered to only 10% of income. On top of this the amount of time until the loan is forgiven has been reduced as well. Now, after 20 years all loan debt will be forgiven, and if the person goes into public service (like jobs in teaching, nursing and the military etc) the entire loan will be forgiven in 10 years. This new repayment plan, unfortunately, will only affect loans signed on or after July 1, 2014.

The other major benefit of the law is the Pell grant overhaul. The act allocates new money to the scholarship enabling it to maintain its maximum award of $5,350, and will eventually increase it to $5975 by the year 2017. Without this the grant was expected to drop to $2,150 by next year.

Overall, the Congressional Budget Office estimates that the student loan reform will have a net effect of saving approximately $62 billion over the next ten years. The house committee on education also predicts a $10 billion reduction in the federal budget over the next decade.