News from NASFAA
Today (Nov 2007) the House Education and Labor Committee is scheduled to consider legislation that would dramatically increase student aid by increasing Pell Grants and loan limits, cutting student loan interest rates, providing income-contingent student loan repayment, and offering new loan forgiveness programs.
The College Cost Reduction Act would increase federal spending on student aid by nearly $20 billion and would pay for this increase by cutting federal subsidies to student loan companies and guaranty agencies.
House Education and Labor Committee Chairman George Miller (D-CA) introduced the bill Tuesday claiming that it would “make the single largest investment in college financial aid since the GI Bill” and do so “at no new cost to U.S. taxpayers.”
Among the benefits to students contained in the bill, it would:
-Cut interest rates in half on subsidized student loans over the next five years.
-Increase federal loan limits to provide borrowers with additional assistance in paying for college and to help them rely less on costlier private loans.
-Increase the maximum Pell Grant scholarship by at least $500 over the next five years, ultimately reaching a maximum scholarship of at least $5,200.
-Expand eligibility to include and serve more students with financial need.
-Provide upfront tuition assistance to qualified undergraduate students who commit to teaching in public schools in high-poverty communities or high-need subject areas.
-Provide loan forgiveness for first responders, law enforcement officers, firefighters, nurses, public defenders, prosecutors, early childhood educators, librarians and others.
-Revise policies to allow public servants to have their loans forgiven after 10 years.
-Establish a partnership with federal, state and local government entities, and philanthropic organizations through matching challenge grants aimed at increasing the number of first-generation and low-income college students.
To pay for this aid the bill would:
-Reduce special allowance rates to lenders
-Eliminate the exceptional performer status
-Reduce lender insurance
-Reduce guaranty agencies’ collection retention
-Increase lenders’ loan fees
How Can Students Navigate the NASFAA Regulations and Other Financial Issues
The student loan world is getting more complex all of the time and students are challenged on many fronts. They need to have the grades to get into wherever they wish to attend school and they need to sort out just how they are going to be able to afford to attend the school they wish to attend. In addition many students are attending school far away from home for the first time. They are exposed to many new people, new experiences and new temptations. As a result of all of these issues and challenges, many students just do not make it through to graduation.
Finding enough money to attend school under these conditions is by far the biggest challenge. Many students have help from their parents. Many supplement these funds by taking a job and working though school at various jobs and making ends meet by spending as little money as possible, while attending college or university.
When savings, parental help and working part time are not enough, many students turn to NASFAA sponsored loans from one of many financial institutions that participate through this program. There are lots of fine print to read and understand and for most students, this is the first time they have been exposed to loans, interest, lending fees, repayment methods and much more.
Any student or for that matter any person who is planning on borrowing money should pay attention to the terms and conditions of the loan that is being proposed. The principle amount is the amount of money being loaned to you. The term of the loan is the length of time you will have to repay the loan, assuming that you make equal monthly payments on the loan. For some student loans, payments do not start until after you graduate or if you quit your school for whatever reason. This is an important point to understand. When do you need to begin repayment of the loan and what happens if you should leave school before you finish and graduate? How long after graduation do you need to begin repayment?
The other major area that students need to pay attention to is the interest rate and when interest is calculated. Every loan can be different depending on who the lender is and whether they are supported by the NSFFAA or not. Some loans do not have any interest charged until after graduation and then the rate will be tied to the current rates at that time, which can be high or low depending on what is happening with the economy. There may also be fees that are levied which add to the cost of the overall loan.
Some students may feel that they have no choice in terms of accepting these loans, since they cannot attend school otherwise. All we are suggesting is that every student understands the terms, the interest rate and repayment options of all possible loan alternatives and then makes the best decision for them at the time.