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US – long live the new student-loan scheme!

It has been a long way, but the Americans are finally there. More than a year after President Obama proposed to put an end to the bank-based system of distributing federally subsidised student loans and directing the savings to education (ACA Newsletter – Education Europe, May 2009), the American Senate at last approved the student-loan bill. The aid bill was part of the controversial health-care package passed last week, and was to a large extent overshadowed by the latter. Because the Senate made a few changes in the text previously approved by the House of Representatives, the comprehensive bill had to go back to the latter for another vote, but was in the end endorsed.

The House of Representatives had already passed a version of the student-loan bill in September last year (ACA Newsletter – Education Europe, October 2009), but the Democrats did not have enough votes for approval in the Senate at that time. The version endorsed last week together with the health-care provisions is a compromise, reducing markedly the amount of money available for education programmes. The compromise legislation is expected to bring only USD 43 billion of the originally USD 94 billion expected savings over a period of 10 years. Both the Pell Grants and the Community colleges will get only a fraction of the intended amounts. Even with this minor increase, colleges are believed to be more affordable now for US students.

The bill puts an end to a long debate in the US on what is the best method for the US government to deliver its low-interest student loans. From now onwards, it will no longer be the private loan companies, but the Education Department itself to distribute the money directly to students

US Congress