Lower interest rates, fees, increased loan limits among changes INDIANAPOLIS, July 8
INDIANAPOLIS, July 8 /PRNewswire/ -- The nation's college students and
their parents will benefit from several major changes in the terms of federal
student loans, according to USA Funds(R), the nation's leading education loan
guarantor.
"Lower interest rates and fees will reduce students' costs of borrowing
for college, while increased loan limits will permit some students to borrow
federal student loans instead of private education loans that often provide
less favorable terms," said Gregory A. Ayers, USA Funds senior vice president,
policy and administration.
Among the recent changes to student loan terms are the following:
Lower interest rates. Interest rates on variable rate federal education
loans, issued prior to July 1, 2006, now are a full 3 percentage points lower
than they were for the previous academic year. Repayment rates on Stafford
loans that were issued between July 1, 1998, and June 30, 2006, have fallen to
4.21 percent, their lowest level in four years. Stafford loans are the most
commonly issued federal student loan type. In addition, fixed rates on new
subsidized Stafford loans issued to undergraduate students during the 2008-
2009 academic year have been cut to 6 percent. Subsidized loans are available
only to students with demonstrated financial need. The federal government
subsidizes the interest on these loans while the student attends college;
during the six-month, post-school grace period; and when the student is
authorized to defer loan payments. Rates on all other new Stafford loans
remain at 6.8 percent.
Reduced loan fees. Total loan fees that may be assessed to Federal
Stafford loan borrowers have been cut by 0.5 percentage points to 2 percent.
The origination fee, currently at 1 percent, is scheduled to be phased out
altogether by July 2010.
Increased loan limits. Undergraduate students will be able to borrow up to
$2,000 more each year in unsubsidized Stafford loans. The student is
responsible for all interest that accrues on unsubsidized Stafford loans. The
U.S. Congress enacted the increased loan limits in an effort to curb reliance
on more-costly, less flexible private education loans.
PLUS loan benefits. Parent-borrowers now will be able to postpone the
start of payment on Federal PLUS loans for up to six months after the student
for whose benefit the loan was issued leaves school or drops below half-time
enrollment. Previously, repayment on parent PLUS loans began within 60 days
after the loans were fully disbursed. PLUS loans are available to parents of
dependent undergraduate students, as well as to graduate and professional
students. An additional change to PLUS loan terms will permit either parents
or graduate students to qualify for a PLUS loan, even if the prospective
borrower has an adverse credit record, as long as the adverse credit is due
solely to a payment on the borrower's home mortgage or a medical payment being
180 days or less past due. This temporary exception is effective through Dec.
31, 2009.
USA Funds provides information on these and other recent changes to the
terms of federal student loans, and many other resources for student loan
borrowers, on its Web site at www.usafunds.org/borrowers.
Headquartered in Indianapolis, USA Funds is a nonprofit corporation that
works to enhance postsecondary education preparedness, access and success by
providing and supporting financial and other valued services. During the year
ending Sept. 30, 2007, USA Funds guaranteed education loans totaling $25.8
billion for students and parents throughout the nation. USA Funds serves as
the designated guarantor of federal education loans in eight states: Arizona,
Hawaii and the Pacific Islands, Indiana, Kansas, Maryland, Mississippi, Nevada
and Wyoming. USA Funds also invests $16.3 million annually in scholarships and
outreach programs that advance its mission of support to higher education. For
more information about USA Funds, visit www.usafunds.org.
SOURCE USA Funds
