What Does Last Night's Vote mean for your Student Loans?

Last night, the House passed legislation considered to be the most significant change to college student lending in a generation. Called the student aid initiative, it would overhaul the student loan industry, eliminating a $60 billion program that supports private student loans with federal subsidies and replacing it with government lending to students.

The amount directed at Pell grants would drop from $40 billion to $36 billion, and a portion of the smaller amount would go toward closing an unexpected shortfall in the grant program, oversubscribed because of the recession. The annual Pell grant would rise to $5,975 by 2017 from the current $5,550, and for the first time, it would be linked to the consumer price index. In the original House bill, the Pell target was $6,900. Democratic leaders say that without a massive infusion of cash, the maximum grant could be scaled back by more than half to $2,150 and at least 500,000 students could be dropped from the program. So if this legislation did not pass, you could see major cuts to the Pell grant program, effectively denying the hundreds of thousands of students who rely on the Pell grant program to go to school.

Given the opportunity to receive larger grants for college, you will have a smaller financial burden during and after school. In addition, you will have more spending and saving possibilities with your current funds. Visit the Savings Rates and CD Rates sections at Best Cash Cow to learn about the best savings options: www.BestCashCow.com.

The remainder of the funds will be distributed to the following educational institutions: Community colleges would get $2 billion, down from $10 billion in the original bill. More than $20 billion in initiatives for early education, K-12 school modernization and student loan interest-rate reduction would be eliminated. But a $2.6 billion investment in historically black colleges would survive. The new bill also includes a $1.5 billion initiative that would cap a borrower's monthly loan payments at 10 percent of income, down from 15 percent.