How does the student loan reform bill affect graduates attempting to pay back their loans?

The legislation makes it easier for future graduates to pay back their student loans. Starting with federal student loans taken out in 2014, future graduates will be able to sign up for an "income-based repayment" plan that will cap their monthly payments at 10% of their income. Anyone paying back federal student loans now can sign up for the current IBR program that caps payments below 15% of income.

How does the student loan reform bill affect students who need financial aid?

It makes more grant money available to more students. By stopping subsidies to private companies that made Stafford loans, the federal government will raise money that it will use to fund more and bigger Pell grants, which typically go to students from families earning less than about $45,000 a year.

For the 2010-11 school year, the maximum Pell grant is $5,550. The bill calls for some future Pell grant increases to be made according to the consumer price index. By some estimates, the maximum Pell grant could rise to $5,900 over the next decade.

Will this reform really cause the loss of up to 31,000 jobs, as its opponents (mostly private lenders) claim?

No. This is just a shift in who makes the loans. Since, if anything, the demand for federal student loans is likely to increase, there will still be plenty of need for workers to process and handle the loans.

The federal government has already arranged to contract with many existing loan companies to service the future loans. The only significant layoffs are likely to be among the salespeople who lobbied colleges to choose a private bank as a "preferred lender." As painful as that will be for the individuals, that's a savings for students because it means there is no more incentive for the kind of kickback arrangements that led to recent scandals, notes Jason Delisle, the director of the Federal Education Budget Project for the New America Foundation.

Besides, if the federal government can make more loans with fewer people, that's an improvement in efficiency that saves taxpayers money, Delisle adds.

Mark Zandi, the chief economist for Moody's Analytics, says, "There should be little job impact from this legislation, and any job losses that do occur will be the result of improved productivity."

Is this a federal "takeover" of the student loan program?

Only a little. Before the reforms passed, the federal government guaranteed the private lenders that made Stafford and PLUS loans that it would repay 97 cents on the dollar for loans that go into default. Now the government makes all the loans, thus taking on the last 3% of the risk, and keeps the billions of dollars it used to pay to private companies for making the loans.

The Congressional Budget Office estimates that that's a good deal for taxpayers, with the net gain to the Treasury totaling more than $60 billion over the next 10 years. Private lenders and banks will no longer get paid by the federal government to make the federally subsidized and guaranteed student loans, but they will still be free to raise private capital from investors and make private loans.

This article was reported by Kim Clark for U.S. News & World Report.