The Education Reconciliation Act of 2010 Homework Help

: The Education Reconciliation Act of 2010

1. How will the Education Reconciliation Act affect student loan companies or Banks?

The Banks and the student loan companies will be affected in different ways both positively and negatively:

• The private banks will be eliminated from process of provision of loans to college students. This is because the Law gets rid of the payment that these banks benefit from as a result of intermediate services that are offered to students. This termination of the subsidies will ensure that $68 billion will be salvaged and this will be used to ensure that the college education is affordable in the next eleven years or so. This reform will be realized through the direct loans dispatched by the Education Department to the financial institutions after the signing of the performance contracts.
• The Federal Family Education Loan gives the banks the security for their money by guaranteeing the lending of money to students. The FFEL will learn a program that gives the lenders or the banks assurance for the safety of their money on behalf of the borrowers (the students) in case of default. The Guarantee includes the interest and the principal amount that was given out as a loan to the students. This is a good boost to the banks as well as the student loan companies as this reduces the losses that results from defaults by the borrowers.

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