<p>I am cutting and pasting this directly from an email bulletin I receive - it summarizes recent changes in the law very well.</p>
<p>*If you don’t follow politics in Washington, DC, higher education financial aid took a major hit in Congress this past month with the passage of the Budget Reconciliation Act of 2005. Senate Bill 1932 has passed the Senate by a 51-50 vote, with Vice President Dick Cheney casting the deciding vote. This act brought a gargantuan number of changes to student loan programs and involves some hefty interest rate hikes to your loans as of July 1, 2006. Here’s a rundown of what’s new:</p>
<li><p>Stafford Loans will have fixed rates of 6.8%, a major increase from today’s 4.7% for students in school and 5.3% for graduates in repayment. Bad for students.</p></li>
<li><p>PLUS Loans will have fixed rates of 8.5%, a huge increase from today’s 6.1% parents are paying. Bad for students - and parents.</p></li>
<li><p>Elimination of Stafford loan in school interest rates, which currently give a 0.6% discount to students in school or in their grace periods. Bad for students.</p></li>
<li><p>Increases student loan limits for selected student loans. Good for students. However, does not change aggregate maximums, meaning students will hit maximums sooner, potentially causing them to be ineligible for federal aid for an entire academic year. Bad for students.</p></li>
<li><p>Allows graduate and professional students to borrow PLUS loans. Good for students. However, those loans will not have any kind of deferment available while students are in school, making them unappealing for students.</p></li>
<li><p>Establishes a supplement to the Pell Grant for students in high-need areas of mathematics and science, up to $4,000 per year. Good for students.</p></li>
<li><p>Makes administration of student loan programs discretionary funding instead of mandatory funding. Thus, Congress can zero out the administrative budget of any student loan program, effectively killing it without having to pass politically unpopular votes. Bad for students.</p></li>
<li><p>Adds a provision for deferral of student loans for active duty military personnel. Good for students.</p></li>
<li><p>Doubles student loan origination fees. If you take out a federal loan after July 1, 2006, your fees will double. Bad for students.</p></li>
<li><p>Prohibits students who consolidate their loans with a FFELP lender from reconsolidating with the Direct Loan program. Currently this is allowed and is part of a consolidation program called a “Super 2 Step”, giving students more lender choice. The change in law makes it nearly impossible for students to switch lenders. Combined with the existing single lender rule, students will be locked into loan programs with no hope of changing lenders. Bad for students.</p></li>
<li><p>Consolidation of student loans for students in school is prohibited. Bad for students.</p></li>
<li><p>Student loan lenders are not obligated to report student loans to credit bureaus. Thus, if you have a good payment history, it doesn’t help your credit rating. Bad for students.</p></li>
<li><p>Allows teachers at private schools to qualify for loan forgiveness. Good for students.</p></li>
<li><p>Student loan rehabilitation made easier with 9 consecutive payments to pull a loan out of default instead of 12. Good for students.</p></li>
<li><p>Allows the Department of Education to retrieve IRS tax data on borrowers. Bad for students, especially if you have privacy concerns!</p></li>
<li><p>Drug related offense ineligibility changed so that you are ineligible for federal aid if your drug offense occured while you were receiving federal financial aid. Good for students.</p></li>
</ol>
<p>The net of these changes is that students will be paying more, paying higher rates, and will have far fewer choices when it comes to student loan lenders than ever before. This is bad overall and bad for students, especially those who rely on federal loans for the bulk of their financial aid.*</p>