The legislation means that you won’t be consolidating your student loans anymore. If you have outstanding student loans and you have not consolidated them, you should immediately contact your lender to see if student loan consolidation is still possible. In some cases, you may find that lenders have already stopped accepting loan consolidation applications or have set application deadlines in anticipation of the impact of this legislation. If you’re still in school or you’ve recently graduated, you may not even be eligible to consolidate your student loans. In many cases, your student loans must be in repayment before you can consolidate. If your grace period has not expired, you may be out of luck. Thank a Democrat for that.

This legislation jeopardizes the sale of Sallie Mae, the largest student loan lender in the industry. The company is in the middle of a sale to a private equity firm, and the sale was originally to conclude in October. What this means for you, the taxpayer, is that suddenly, Sallie Mae isn’t so attractive anymore. Since the Federal government backs Sallie Mae’s loans, you could be picking up the bill for some of Sallie Mae’s lending, if things don’t work out right.

This legislation reduces the amount of money the Feds spend on debt collection. This is a bad sign. The Feds already have a high default rate in their own program, - it currently approaches 25 percent. We have recently seen stories of the amount of money the Canadian government spends to collect on defaulted student loans for their government-run student loan program. It exceeds the amount of money that program makes on the interest. By decreasing the funds available for collection activities, the Congressional Democrats are throwing in the towel before the plan even starts moving. They’re willing to “accept” the costs of writing off a certain amount of default debt. That’s easy for them to do; they’re not losing their money. They’re losing yours! Instead of being diligent with your money, as the FFELP lenders have been, they’re throwing it away. That’s typical of Congress and you should expect more of the same in the coming years.

The legislation is unstable and it provides an interest rate cut for just four years. The next re-authorization will take place as the country is beginning to gear up for the next election cycle. This approach isn’t doing the taxpayers or student loan borrowers any favors. Congressional Democrats have layered into the program a structural instability that guarantees change every four years. If Congress is sleeping, which is entirely possible, as we’ve seen in the past, your interest rates could shoot up unexpectedly.

On the other hand, experts agree that low interest rates, which don’t really address the issue of the cost of higher education, aren’t really the best mechanism to reducing the cost of a college education. Four years from now, you could get stuck with another round of policy failure based on low interest rates on student loans, when that strategy does nothing positive in the long-term.