In an effort to re figure the cost of student education, the House and Senate have passed new bills regarding private student loans. The normal $18/19 billion that is spent annually by the federal government to pay the student loan companies now turns into $17/18 billion that is paid directly to students. Not all of the details have been formulated at this point but one important detail has, the interest rate will be cut from 6.8% to 3.4%.

In return, the Pell Grant ceiling will be raised to $5,200 a year and students that take a public service job upon graduation would qualify for yet another break on their loans. Congress is finally moving in the right direction after years of student difficulties in paying rising tuition costs, 35% in just 5 years.

Private Student Loans will now be delivered to students in one of two ways: either directly from the government through a private lender that is governmentally subsidized. The Congressional Budget Office estimates the the public service loan forgiveness program would save an average $20 million a year. This program requires a student’s loans to be consolidated into the government’s direct lending program.

If the Senate and the House abolished subsidies to private student loan lenders entirely, they could save $3-5 billion annually, but would never dream of going that far. Even so, because fo the new bills passed, lenders are scrambling to to keep their federal subsidies and a few will be driven out of the market entirely. In a time when the government finally realizes that the students need a break, it is also a sweet time for lenders and some university administrators.