Admission

Financial Aid

Federal Stafford Loans

Recent Legislation that will go into effect on July 1, 2012

Budget Control Act of 2011

• Interest Subsidy for Graduate Students: The Budget Control Act also eliminates the in-school interest subsidy for graduate and professional students beginning July 1, 2012, a provision that would save $18.1 billion from FY 2012-21, $8.2 billion of which is from FY 2012-16, according to the Congressional Budget Office (CBO). The legislative language clarifies that the subsidy elimination does not apply to students taking preparatory coursework and those in programs leading to teacher certification where the credential is awarded by the state instead of the institution.

• Direct Loan Repayment Incentives: Repayment incentives were also eliminated in the final package. The incentive for using automatic debit repayment provided borrowers with a 0.25 interest rate reduction and the up-front interest rebate incentive was equal to 0.5 percent of the loan amount and applied toward the 1 percent loan origination fee. For PLUS loans, the up-front interest rebate was 1.5 percent applied toward the 4 percent origination fee. Borrowers were able to keep the rebate if they made their first 12 payments on time. The language prohibits the Department of Education from authorizing or providing repayment incentives on new loans disbursed on or after July 1, 2012, except that an interest rate reduction may be provided to a borrower who agrees to automatically debited electronic payments. The CBO projects the elimination of the origination fee rebates would yield $3.6 billion from FY 2012-21.

Through a combination of Subsidized Federal Stafford and Unsubsidized Federal Stafford Loans, graduate students may borrow up to $20,500 per academic year with a maximum aggregate total of $138,500 for all undergraduate and graduate loans of which a maximum of $65,500 is in subsidized loans.

These loans must be coordinated with other aid and cannot exceed the total annual education costs.

If a student demonstrates sufficient financial need, they can qualify for a Subsidized Federal Stafford Loan. "Subsidized" means the federal government will pay the interest that accrues while the student is in school, during a six-month, post-school grace period or in any authorized period of deferment. If the student fails to show sufficient need, they can still qualify for an Unsubsidized Federal Stafford Loan. With an unsubsidized loan, the student will be responsible for paying the interest that accrues during school, grace, and deferment periods. The student is not required to pay the interest while in school. If the student chooses not to make interest payments while in school, the interest will be "capitalized," which means that the lender will add the accrued interest to the principal balance of the loan. Future payments will be based on both the principal (original amount borrowed) plus any capitalized interest.

Interest Rates and Fees

Federal Stafford Loans disbursed on or after July 1, 2006, will have a fixed interest rate at 6.80 percent. Federal Stafford Loans disbursed before July 1, 2006, will have a variable rate which is adjusted annually on July 1. The interest rate cap is 8.25 percent. For loans adminstered under the Family Federal Education Loan Program (FFELP) Federal Stafford Loan fees may be deducted at the time of disbursement and may consist of an origination fee up to 3 percent and a federal default fee of up to 1 percent, depending on the lender chosen by the student. For Direct Subsidized Loans and Direct Unsubsidized Loans first disbursed between July 1, 2010 and June 30, 2011, there is a loan origination fee of 1.0 percent of the loan, deducted proportionately from each loan disbursement. The fee goes to the government to help reduce the cost of the loans. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.

New interest rate cap for Military Members

Interest rate on a borrower's loan may be changed to six percent during the borrower's active duty military service. This applies to both FFEL and Direct loans. Additionally, this law applies to borrowers in military service as of August 14, 2008.

Borrower must contact the creditor (loan holder) in writing to request the interest rate adjustment and provide a copy of the borrower's military orders.

In addition, no interest accrues (for a period of no more than 60 months) on Direct Loans disbursed on or after October 1, 2008, for eligible military borrowers while serving on active duty or performing qualifying National Guard duty during a war or other military operation or other emergency, and serving in an area of hostilities qualifying for special pay.