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There are many college students who work day and night to make ends meet and pay back their student loans. Even as they attend college, they are forced to work part time in restaurants and other places to make ends meet. With the new student loan federal reforms, it will sure become easier for them to pay for school in future.

The education reconciliation act was recently signed into a law by President Obama that will greatly reduce the burden on loan repayment for students who graduate. This is made possible through various measures including expansion of Pell Grants that is offered to students who come under the low-income category.

At least $68 million will be freed up if the student loan sector is taken over completely by the government and the private lender subsidies and eliminated. This money will then go towards paying for the reforms.

There will be a cost of living increase in the Pell Grant which will hitherto be based on consumer price index starting from the year 2013. This will make the amount of loan to be taken by students lesser too. Till now, students found that Pell Grant just covered the cost of campus living and they had to balance a job and studies and of course help from parents to manage the situation and complete college studies. 

Apart from those who are already benefited by the Pell Grant program, at least 820,000 more students will benefit by the year 2020 as per the new law passed. Many students will also be from the higher income bracket.

This landmark act will include students in the income level of up to $50,000. Until now this program was benefiting only students with an income level of below $20,000. Pell Grant in future will also benefit students from historically black colleges and community colleges. Its benefits will extend to universities that adopt loan repayment programs that are income based.

Students have the choice of limiting their loan repayment to ten percent of their income. After twenty years of regular repayment, any balance amount will be forgiven. For public service workers loans will be forgiven in just ten years.

The Education Secretary Arne Duncan voiced the President’s opinion that the only way our country can move forward towards a better economy is through higher education access to as many deserving students as possible.

Coalition of student loan industry entities however understandably criticised this act saying that this could lead to a mass lay-off in the lending industry and could mean increased headaches for students.

It just remains to be seen whether the federal government will take sufficient steps to reduce the cumbersome loan disbursement process and make it very easy for students to obtain student loans. This will categorically tell us whether the reforms are indeed effective or not. It also remains to be see what the President has to say about the expected lay-offs in the lending industry.