On March 30, 2010, President Obama signed into law changes to federal student loans and Pell Grants. Below are key changes.

What is happening to student loans?

Starting July 1, 2010 ALL federal higher education student loans will be originated by the U.S. Department of Education, instead of private banks, and will have the same terms and conditions that have been in effect for years.

Where?

Students will still apply for federal loans through the student financial aid office at their college or university.

When

The changes will take place for loans originating on or after July 1, 2010.

What about private student loans?

This does not affect private student loans in any way, just federal student loans.

Does this apply to loans for graduate school?

Yes, it applies to ALL federal student loans.

What about existing loans?

The bill will not change anything about loans that students have already taken out.

It does make changes to the existing Income-Based Repayment program, which allows some borrowers to cap their monthly payments on federal loans at 15% of their discretionary income.

For new borrowers who are eligible for Income-Based Repayment, they will be able to cap their monthly loan payment at 10% of their discretionary income (the cap is currently 15%) and shorten the window for repayment from 25 years to 20 years, at which time the remaining balance of the loan may be forgiven.

Who is eligible for federal grants and loans?

Most students are eligible for some form of federal grant or loan.

What about Pell Grants?

This bill increases the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $5,975 by 2017. Starting in 2013, the scholarship will be increase with costs of living by linking it to the Consumer Price Index.

Will these changes bring the cost of schooling down?

No.

More Information

Online: www.studentaid.ed.gov

Or Call: 1-800-4FED-AID

Or the Financial Aid Office at your college or university.