by Kathleen Malloy

President Barack Obama announced plans to both reform the financial aid process for higher education and to improve the quality of public education in the 2010 State of the Union Address.

The Obama Administration stressed the need to reform funding for higher education away from private financial intuitions such as Sallie Mae. Recently the House of Representatives passed the Student Aid and Fiscal Responsibility Act (SAFRA), which aims to move fiscal responsibilities and allocation of funds under the discretion of the federal government. The new program increases the number of Pell Grants and Perkins Loans.

“To make college more affordable, this bill will finally end the unwarranted taxpayer subsidies that go to banks for student loans,” said Obama. “Instead, let’s take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants.”

According to TIME Magazine, the proposed bill can save nearly $87 billion over the next 10 years. The new program will immediately abolish the current Federal Family Education Loan (FFEL) program that roughly 4,500 universities nationwide use, implementing a direct-loan arrangement between the federal government and students. TIME Magazine also indicated the potential loss of roughly 35,000 jobs in the transition.

Moreover, the legislation will alter the allotted time private citizens have for repayment.

“And let’s tell another 1 million students that, when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years,” continued Obama. “And forgiven after 10 years if they choose a career in public service, because in the United States of America, no one should go broke because they choose to go to college.”

Presently Sallie Mae, the main institution responsible for providing financial aid to students, offers a variety of payment options. Sallie Mae’s Web site explains that students are able to elect plans such as standard, graduated, income-sensitive, income-based, and extended repayment options regarding federal loans. The institution also claims students “can repay loans in part or in full at any time without penalty,” stating this can lower the overall cost of the advance. Most billing entails a 10-year repayment schedule with refinancing opportunities.

“In the 21st century, the best anti-poverty program around is a world class education,” said Obama.

In addition to the loan program discussion, the administration relayed strategies to revive the public education system through the Elementary and Secondary Education Act, also referred to as the No Child Left Behind Act. The renewal of the legislation will help students to excel in the areas of mathematics and science. Furthermore, Obama urged Congress to provide legislation to revitalize community colleges for students of working class backgrounds.