Here’s a welcome change—some good news about student loans. In response to the worsening economy and the credit crunch, the U.S. federal government has enacted some recent policy changes that will make it easier to get student loans, and a little less painful for both students and parents to pay them back.
Here’s a summary of the recent changes:
The Stafford loan program has been expanded. Most undergraduates will now be eligible to borrow up to $5500 per year, and most upperclassmen will now be eligible for $7500. Virtually all students will be eligible to receive Stafford loans as long as they fill out the Free Application for Federal Student Aid (FAFSA). Students who are 24 years old and above, or who are independent of their parents, will be able to borrow an additional $6000. These Stafford loans will come with an interest rate of no more than 7.25%.
Needy students will be eligible for a lower Stafford loan interest rate of 6%– and further cuts are in the works.
Interest rates will drop to 4.21% on all unconsolidated student loans issued before July 1, 2006. This includes loans that are currently being paid back, as well as loans that are not.
Parents who take out a new PLUS loan can now defer payments until six months after their child has graduated from school. In addition, it’s become easier for parents to qualify for PLUS loans. And if a parent is denied a PLUS loan because of credit problems, the child is then eligible for additional Stafford Loan funds.
Loans are still a burden, of course, and these actions don’t solve the problem that a college education has become overwhelmingly expensive for students and families. But perhaps this is a move in the right direction.