Stafford Student Loan News

Effective July 1, 2008…

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN GRACE (IG) = 3.6%

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN REPAYMENT (RP) = 4.21%

Variable rate Parent plus loan disbursed prior to July 1, 2006 = 5.01%

* note that any Stafford and PLUS loan that were taken out before July 1, 2006, and has never been consolidated, will have these new rates

* note that with consolidation, these rates are rounded to the nearest 1/8% which would make them:

3.625% Stafford in grace

4.25% Stafford in repayment

5.125% Parent Plus

For those who don’t know, if you have past drug convictions, for selling or possession while you were receiving Federal aid, then this can affect your aid eligibility. Your eligibility for Federal aid is revoked for a period of time (directly correlated to the type and number of convictions). I did some research on this, and it appears that as long as you have completed an “acceptable drug rehab program”, you can still receive federal aid. There are no time constraints on this…you could be convicted of selling/possessing drugs, enter a rehab program, complete it, and still get Federal aid right away. An acceptable drug rehab program consists of:

An acceptable drug rehabilitation program must include two random drug tests.

The program must also:

• Be qualified to receive funds from federal, state, or local governments

OR

• Be qualified to receive funds from a federal or state licensed insurance company

OR

• Be administered or recognized by a federal, state, or local government agency or court

OR

• Be administered or recognized by a federal or state licensed hospital, health clinic, or medical doctor

I also found that if this drug conviction (for selling or possessing) was 2 or more years ago, then a drug rehab program is NOT required, and you should still be able to get federal aid. If you have more than 1 drug conviction in the past 2 years, then your eligibility is suspended for longer. So basically, if you have more than 1 drug conviction in the past 2 years, you have to wait longer in order to be eligible for Federal aid. (it appears that each drug conviction you have = 1 year of lost eligibility). If you have 3 or more drug convictions in the past, then you are ineligible for Federal aid indefinitely.

Starting with the 2008-2009 school year, the Federal Parent Plus Loan can now be deferred until 6 months after the child’s graduation. This is a big change, because typically Parent Plus loans were due immediately upon disbursement. This will help a lot of parents out who are trying to help their children to pay for College, but cannot afford the monthly payment while the student is in school. This also helps the parents who plan on having the child repay the loan when they are done.

Remember, that Parent Plus loans are the parent’s responsibility for the life of the loan. There is no way to switch the loan to the students name when the student is done (short of taking out a private loan to pay it off, which I don’t recommend).

Also, I am asked quite frequently if the Plus loan can be used to living expenses….if the student is living off campus. The answer to that is, IF the school agrees to it, then yes. They are the ones that certify the actual amount of the loan. Check with the school, and explain to them what you need the money for…this way the loan will be disbursed, and most of it will go towards tuition that is due, then the remainder would go to the parent or student to help with living expenses.

If you need a PLUS loan for this upcoming school year, and your child knows what College they are attending, apply for this loan NOW…every day lenders are dropping out of this loan program, due to an ever changing student loan industry…so its best to get your paperwork in now.

Via NASFAA:

Beginning July 1, 2008, HR 5715 passed by Congress will allow parents to choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly.

Special Provision for Parents Delinquent on Mortgage Payments

The bill would allow lenders to consider parents eligible for PLUS loans even if, during the period January 1, 2007, through December 31, 2009, the parents are or were:

* No more than 180 days delinquent on a mortgage payment on their primary residence

* No more than 180 days delinquent on any medical bill payments

* No more than 89 days delinquency on the repayment of “any other debt”

From NASFAA:

Increase Annual and Aggregate Stafford Loan Limits

HR 5715, as passed by Congress, will increase the following loan amounts for loans first disbursed on or after July 1, 2008:

* Increases the additional unsubsidized Stafford annual limits by $2,000 for independent undergraduate students, and for dependent undergraduate students whose parents cannot borrow PLUS, but appears to reduce the additional unsubsidized limit for teacher certification to $6,000 for “undergraduate” students

Note - The original legislation also increased the additional unsubsidized Stafford annual limit for graduate and professional students by $2,000, but that provision was later eliminated by an amendment in the House

* Increases unsubsidized Stafford limits for dependent students by introducing additional unsubsidized amounts of $2,000

* Increases aggregate unsubsidized loan amounts for undergraduate dependent students from $23,000 to $31,000 (minus subsidized borrowing) but does not appear to extend additional unsubsidized funds for preparatory coursework or teacher certification for these students.

* Increases aggregate unsubsidized loan amounts for undergraduate independent students from $46,000 to $57,500 (minus subsidized borrowing) .