NEW YORK ( TheStreet) -- Education advocates cheered the debt ceiling deal for preserving funding for low-income undergraduate students and were mostly relieved that the cuts weren't as bad as expected.
The deal eliminates the interest subsidy on federal loans for students in graduate and professional programs. Currently, such students are not charged interest on the loan while in school and during grace and deferment periods.
The proposal also does away with some incentives that encourage on-time repayment of federal loans. Under the proposal, students will no longer receive a partial rebate on their origination fee.
Under current law for the partial rebate, borrowers initially pay only 0.5 percent of the 1-percent borrower origination fee on subsidized and unsubsidized loans. If a borrower makes 12 on-time payments in the first year of repayment, the Secretary of Education will forgive the additional 0.5 percent of the origination fee.The two changes to the Federal student loan program will generate nearly $22 billion in savings over a ten year period beginning July 1, 2012, when the new rules take effect. Of the savings, at least $17 billion will go towards funding the Federal Pell Grants - which awards a maximum of $5,550 to undergraduate students who are financially needy. According to Sandy Baum, , a consultant to not-for-profit organization