changes to student aid effective july 1, 2009
Many new changes to student aid programs that took effect July 1 benefit students by lowering the cost of student loans, increasing grant aid for Pell Grant recipients, and providing new assistance for students with unmanageable education loan debt. The following summarizes some of the major changes to the student aid programs. The full article can be viewed at nasfaa.org.
Loans
Lower Interest Rates. On July 1, the interest rates on subsidized federal student loans for undergraduates decreased from 6 percent to 5.6 percent. This is the second of four annual cuts in this interest rate; it will continue to drop until it reaches 3.4 percent in 2011. Also, borrowers with Stafford loans issued prior to July 1, 2006, benefited from a more than 1.7 percentage point reduction in their rates due to declines in prevailing interest rates.
Reduced Fees. Upfront borrower origination fees on Stafford loans have lowered 0.5 percentage point. The maximum upfront origination fee to be deducted from a student's Stafford loan funds has declined from 1 percent to .5 percent on loans with initial disbursements between July 1, 2009, and June 30, 2010. (An additional 1% may be charged for insurance for a total possible upfront deduction of 1.5%).
New Income-Based Repayment Program. On July 1, a new Income-Based Repayment (IBR) program went into effect that caps borrowers' monthly loan payments at 15 percent of their discretionary income (that is, 15 percent of what a borrower earns above 150 percent of the poverty level for their family size). Any current or future borrower whose loan payment exceeds 15 percent of his or her discretionary income is eligible. After 25 years in the program, borrowers' debts will be completely forgiven. Borrowers with hefty debt or low-paying jobs are most likely to qualify for the program. IBR covers all federal loans -- both Direct and FFELP -- made to students, including Stafford, Grad PLUS and federal consolidation loans, but not those made to parents (PLUS loans). Perkins loans are also eligible if a borrower consolidates them into a FFEL or Direct Loan.
Grants
Maximum Pell Grant. Funding provided by the College Cost Reduction and Access Act (CCRAA) and the American Recovery and Reinvestment Act (ARRA) increases the maximum Pell Grant for the 2009-10 school year to $5,350 -- more than $600 above last year's award.
Minimum Pell Grant. The HEOA eliminated the $400 minimum award and sets a new minimum award at 10 percent of the appropriated maximum award set each year. Students who are eligible for an award equal to or greater than five percent but less than 10 percent of the maximum award will receive an award amount of 10 percent of the maximum award appropriated each year. For the 2009-10 school year, 10 percent of the appropriated maximum is $486, but the CCRAA adds $490 to all full-time awards, so the minimum Pell Grant for a full-time student is $976. (For part-time students, these amounts are prorated.)
Year Round Pell. Students are now eligible to receive Pell Grants year round.
Expanded ACG/SMART Grant Eligibility. Eligibility for these grants have been expanded to include eligible non-U.S. citizens and students attending at least half-time. In addition, awards will be made based on grade level and not academic progress. Interim final rules implementing these changes were published May 1.
Article from www.nasfaa.org
Author: Haley Chitty
NASFAA Director of Communications
Posted: 7/9/2009