After July 1st, 2010, the federal government will become the sole lender for all federal student loans. Here’s what this means for current and future students.
The changes to the federal student loan programs (Stafford and PLUS loans) were enacted as part of the 2010 healthcare legislation. Along with the changes to loans outlined below, the bill also allocates more money for Pell grants. The maximum grant per student will rise from it’s 2010 level of $5,550 to $5,975 at a cost to taxpayers of $36-billion over the next decade.
The first major change comes about when the federal government assumes control of federal student loans in July. A total of 4 different agencies will begin servicing the loans, and their impact depends on when the loan was originated:
- Loans after July 1st, 2010 will be serviced by the federal government.
- Loans originated prior to July 1st, 2010 will be taken over by the feds if they are currently federal loans.
- Student loans that are not funded by the federal government will remain unchanged for now.
- Students are encouraged to contact their financial aid office if they’re unsure if they have a private of federally backed loan.
Changes to federal student loan program.
One-time consolidation exception. Current students for the 2010-11 academic year can consolidate their loans prior to graduation. NOTE: Students who take this opportunity to consolidate early will lose their 6 month repayment grace period after they graduate.
More forgiving repayment terms. The current income-based repayment program is expanded under the new law. Students with high debt-to-income (student loan debt only) will have to pay no more than 10% of their discretionary income, and the remainder of the debt will be forgiven after 20 years. This is a change from the 15% cap on payments and forgiveness after 25 years. These changes apply to loans after July 1st, 2014.
More aid for some colleges. Community colleges will receive $2 billion in additional aid over the next 4 years, and “minority-serving institutions” will receive $2.55 billion in aid.
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