Health care bill impacting student loans - KLTV.com - Tyler, Longview, Jacksonville |ETX News

Health care bill impacting student loans

TYLER, TX (KLTV) -

By Courtney Lane - bio | email
Posted by Ellen Krafve - bio | email

TYLER, TX (KLTV) - It turns out the health care reform law is also changing the way college students borrow money. Banks and private lenders are about to be cut out. Instead, students will only borrow directly from the federal government.

Direct lending is not new. U.T. Tyler made the switch last year and LeTourneau University has been getting ready, too.

"Because it appeared that our funding sources were going to be severely limited if we stayed with the private lenders," said Linda Fitzhugh, Vice President of enrollment services at LeTourneau University.

Without paying fees to banks and private lenders, the measure promises to save $61-billion over the next 10 years. But, it could also result in the loss of thousands of jobs in the private student banking industry.

"As I understand, six more months and the private sector is out of business," said James Shaw with SouthSide Bank.

Shaw says it is a risky and massive switch.

"It's going to take down an infrastructure that's been being built up...and replace it with contractors," said Shaw. "Then there's going to be jobs open up somewhere else."

The measure promises to infuse the drained Pell Grant Program with more than $13-billion additional dollars.

Students like David Hansen say that is exciting, but he questions if the government can run the massive overhaul efficiently.

"Government doesn't always handle things as well as we would hope, but if it means more money at the moment, I'm not complaining at the moment, and I'll support it," said Hansen.

"They'll be dealing with one lender and their eligibility will remain the same, in fact, might be improved," said Fitzhugh.

Fitzhugh says it would be easier for schools, too, dealing with only one agency. And, she says interest rates would remain steady.

"The interest rates have always been regulated whether you're on the direct lending program or with private lenders...so the interest rates should be exactly the same," she explained.

Savings from the switch to direct government lending would also direct about $19-billion to reducing the deficit and offsetting expenses in the health care legislation.

Fitzhugh says currently, only about 25% of student borrowers across the country use direct lending so most would be required to switch if this passes. But, she says it is a fairly easy process.

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