July 1 Changes to Student Aid

There are a host of changes to student aid = programs=20 coming on July 1. Many of these changes will = benefit=20 students by lowering the cost of student loans,=20 increasing grant aid for Pell Grant recipients = and=20 military veterans and providing new assistance = for=20 students with unmanageable education loan debt. = This=20 article summarizes some of the major upcoming = changes to=20 the student aid programs.=20

Loans=20

Lower Interest Rates. On July 1, = the=20 interest rates on subsidized federal student = loans for=20 undergraduates will decrease from 6 percent to = 5.6=20 percent. This is the second of four annual = cuts in=20 this interest rate; it will continue to drop = until it=20 reaches 3.4 percent in 2011. Also, borrowers = with=20 Stafford loans issued prior to July 1, 2006, = will=20 benefit from a more than 1.7 percentage point=20 reduction in their rates due to declines in = prevailing=20 interest rates.=20
Reduced Fees. Upfront borrower = origination=20 fees on Stafford loans will be lowered 0.5 = percentage=20 point. The maximum upfront origination fee = that will=20 be allowed to be deducted from a student's = Stafford=20 loan funds will decline from 1 percent to .5 = percent=20 on loans with initial disbursements between = July 1,=20 2009, and June 30, 2010. (An additional 1% may = be=20 charged for insurance for a total possible = upfront=20 deduction of 1.5%).=20
New Income-Based Repayment Program. = On July=20 1, a new Income-Based Repayment (IBR) program = will go=20 into effect that caps borrowers' monthly loan = payments=20 at 15 percent of their discretionary income = (that is,=20 15 percent of what a borrower earns above 150 = percent=20 of the poverty level for their family size). = Any=20 current or future borrower whose loan payment = exceeds=20 15 percent of his or her discretionary income = is=20 eligible. After 25 years in the program, = borrowers'=20 debts will be completely forgiven. Borrowers = with=20 hefty debt or low-paying jobs are most likely = to=20 qualify for the program. IBR will cover all = federal=20 loans -- both Direct and FFELP -- made to = students,=20 including Stafford, Grad PLUS and federal=20 consolidation loans, but not those made to = parents=20 (PLUS loans). Perkins loans are also eligible = if a=20 borrower consolidates them into a FFEL or = Direct Loan.=20
20/220 Elimination. Despite efforts = by=20 NASFAA and other higher education = organizations, the=20 current 20/220 debt-to-income ratio pathway = for=20 borrowers to qualify for an economic hardship=20 deferment in the FFEL and Direct Loan programs = is=20 scheduled to end on July 1, 2009. Currently, = students=20 can qualify for an economic hardship deferment = if they=20 1)are employed full-time, 2) have an education = loan=20 debt burden equal to or greater than 20 = percent of=20 monthly income, and 3)have an income minus the = education debt burden that is less than 220 = percent of=20 the greater of the minimum wage rate or the = federal=20 poverty line for a family of two. H.R.=20 1615, the Medical Economic Deferment for = Students=20 (MEDS) Act, would extend this program. The = Department=20 of Education has argued that the program does = not need=20 to be extended because the IBR program will = provide=20 relief for students currently being served by = 20/220.=20
Competitive Loan Auction Pilot Program=20 Canceled. The PLUS Loan Auction Pilot = program was=20 scheduled to begin July 1, but the Department = of=20 Education can celled the program due to a lack = of=20 interest from FFELP lenders.

Grants=20

Maximum Pell Grant. Funding = provided by the=20 College Cost Reduction and Access Act (CCRAA) = and the=20 American Recovery and Reinvestment Act (ARRA)=20 increases the maximum Pell Grant for the = 2009-10=20 school year to $5,350 -- more than $600 above = last=20 year's award.=20
Minimum Pell Grant. The HEOA = eliminated the=20 $400 minimum award and sets a new minimum = award at 10=20 percent of the appropriated maximum award set = each=20 year. Students who are eligible for an award = equal to=20 or greater than five percent but less than 10 = percent=20 of the maximum award will receive an award = amount of=20 10 percent of the maximum award appropriated = each=20 year. For the 2009-10 school year, 10 percent = of the=20 appropriated maximum is $486, but the CCRAA = adds $490=20 to all full-time awards, so the minimum Pell = Grant for=20 a full-time student will be $976. (For = part-time=20 students, these amounts are prorated.)=20
Sex Offenders and Pell Grants. The = HEOA=20 provides that a student who is subject to an=20 involuntary civil commitment after completing = a period=20 of incarceration for a forcible or nonforcible = sexual=20 offense is ineligible to receive a Federal = Pell Grant.=20
Children of Soldiers. The HEOA = provides=20 maximum Federal Pell Grant eligibility for a = student=20 whose parent or guardian was a member of the = Armed=20 Forces and died as a result of performing = military=20 service in Iraq or Afghanistan after = 9/11/2001,=20 provided that the child was under 24 years old = or was=20 enrolled in college at the time of the parent = or=20 guardian's death. These students will be = considered to=20 be eligible for the maximum Federal Pell Grant = award=20 for the period during which the student is = otherwise=20 eligible to receive a Federal Pell Grant. ED = will work=20 with the Departments of Defense and Veterans = Affairs=20 to identify affected students.=20
Year Round Pell. Students will be = eligible=20 to receive Pell Grants year round after July = 1. The=20 Department of Education is currently dr= afting=20 proposed regulations to implement this new = benefit=20 for students.=20
Expanded ACG/SMART Grant = Eligibility.=20 Eligibility for these grants will be expanded = to=20 include eligible non-U.S. citizens and = students=20 attending at least half-time. In addition, = awards will=20 be made based on grade level and not academic=20 progress. Interim final rules implementing = these=20 changes were published May 1.

Military Benefits=20

Excluding Veteran Education = Benefits.=20 Congress is expected to pass a HEA technical=20 corrections bill this month that will change = the date=20 (from July 2010 to July 2009) for financial = aid=20 offices to begin excluding veteran education = benefits=20 when determining eligibility for student loans = and=20 campus-based aid. This would ensure that = benefits=20 provided by the Post 9/11 GI Bill - that goes = into=20 effect this July - does not reduce veterans'=20 eligibility for additional aid. Keep an eye on = Today's=20 News for final disposition of the amendment.=20
Post 9/11 GI Bill -- Effective Aug. = 1. The=20 Post-9/11 GI Bill is for individuals with at = least 90=20 days of aggregate service on or after = September 11,=20 2001 (see
http://www.gibill.va.gov/).=20 This program will pay an eligible = individual's:=20
- tuition & fees directly to the = school .=20 Payment is not to exceed the maximum = in-state=20 tuition & fees at a public Institution = of Higher=20 Learning;=20
- monthly housing allowance based on the = Basic=20 Allowance for Housing for an E-5 with = dependents at=20 the location of the school;=20
- annual books & supplies stipend of = $1,000=20 paid proportionately based on enrollment; = and=20
- one-time rural benefit payment. =
Under=20 the auspices of the Post-9/11 GI Bill, private = institutions can enter a matching program with = the=20 Department of Veterans Affairs (the "Yellow = Ribbon"=20 program) to fund some or all of the difference = between=20 actual tuition and fees and the basic tuition = and fee=20 benefit.=20
In-State Tuition. The HEOA = prohibits public=20 institutions of higher education from charging = a=20 member of the armed forces who is on active = duty for a=20 period of more than 30 days, and whose = domicile or=20 permanent duty station is in a State that = receives=20 assistance under the HEA, his or her spouse, = or his or=20 her dependent children, tuition at a rate = higher than=20 the public institution's in-state tuition rate = for=20 residents of the State. In addition, if a = member of=20 the armed forces who is on active duty, his or = her=20 spouse, or his or her dependent child pays = such an=20 in-state tuition rate, the public institution = must=20 allow the individual to continue to pay such a = rate as=20 long as the individual is continuously = enrolled, even=20 if there is a subsequent change in the = permanent duty=20 station of the member to a location outside of = the=20 state. This provision is effective at each = public=20 institution of higher education in a State = that=20 receives assistance under the HEA for the = first period=20 of enrollment at the institution that begins = after=20 July 1, 2009.=20
By Haley=20 Chitty
NASFAA Director of = Communications=20

Posted 06/15/09 to www.NASFAA.org. = Redistribution=20 to non-NASFAA institutions is prohibited. = Please=20 submit Web site questions or comments to mailto:Web@NASFAA.org