Loyola students receiving federal aid will need to change how they manage their student loans this summer.

The new Health Care and Education Reconciliation Act of 2010, passed March 30, is “One of the most significant investments in higher education since the G.I. bill,” according to President Barack Obama. The law focuses on simplifying the federal student loan process, extending the Pell Grant Program and changing the way students will pay back loans after graduation. Obama said that the law will “save American tax payers $68 billion in the coming years.”

The new legislation ends the Federal Family Education Loan Program that gave private banks the ability to manage federal student loans such as Federal Stafford, Federal PLUS and Grad PLUS loans.

By doing this,  the legislation will require that all students switch to the Federal Direct Loan Program by July 1.

“Now there will be one central place where students do everything during the life of the loan,” said Catherine Simoneaux, director of the Office of Scholarships and Financial Aid.

“During the past couple of years, in particular, it became very difficult for students and parents to keep track of their loans as lenders often sold their portfolios to third party servicers.”

Loyola students will now be required to obtain all federal loans through the William D. Ford Federal Direct Loan Program where borrowers obtain loans directly from the United States Department of Education.

The loan application system remains the same for students who are already taking out federal loans. Students must complete the FAFSA form and a new master promissory note to receive federal aid.

The system has slightly changed for first time borrowers.

Students who are new to the program must complete an entrance counseling session that provides information on how the program works. It is available on the program’s Web site.

The law will decrease the rate at which students are required to repay federal loans. Students are currently required to spend 15 percent of their salary paying back federal student loans and have their debt forgiven after 25 years.

Students will only pay 10 percent of their salary for 20 years under the new legislation if they take out loans after July 1, 2014.

In addition, the Federal Pell Grant Program will receive more than $40 billion from the law to expand the program and to raise the grant’s value so that it can keep up with the rising cost of college.

“It may be a little complicated this summer as we all get used to the new process,” Simoneaux said. “But, in the end, I think students will be better served under this system and that is the most important consideration.”

Sam Winstrom can be reached at [email protected]