Just a week after signing the landmark national health care bill, President Barack Obama signed legislation March 30 that will overhaul the federal student loan program.
Dan Small, executive director of GW’s student financial assistance, talked with GW Today about the historic bill and how it will affect GW and students.
Q: What are the major provisions of the new student loan law?
A: The law eliminates the Family Education Loan Program, which funded Federal Stafford Loans and PLUS Loans, which are given to parents and graduate students. Students will no longer apply for federal loans through private lenders. Instead, students only need to apply for federal government loans through the Federal Direct Loan Program, and the U.S. Department of Education will serve as the new lender.
Q: When does the law go into effect?
A: June 30, 2010.
Q: Do the eligibility requirements change?
A: Eligibility remains exactly the same.
Q: How will students be affected?
A: The application process will be much easier, and the electronic transfer of funds will be more timely and efficient. With faster and more reliable delivery of funds to student accounts, this will more than likely reduce the number of students faced with financial holds, which can result in students being prevented from registering for classes.
Q: What do current students with student loans need to do?
A: There is no need to notify your current lender in order to participate in the Federal Direct Loan Program. Students need to sign a new Master Promissory Note with the U.S. Department of Education. GW’s Office of Student Financial Assistance has outlined the steps you need to take here.
If you have existing Stafford loans, you may want to consider consolidating past loans into the Federal Direct Loan Program. More information can be found here.
Q: How will the new law affect repayment requirements?
A: In the future, some students who borrow money will be allowed to cap their repayments at 10 percent of their income, down from the current 15 percent. Students who keep up their payments will have any remaining debt forgiven after 20 years instead of the current 25.
Q: Will interest rates change?
A: Interest rates will be similar to those charged by private lenders, if not lower.
Q: Because the new law eliminates fees paid to private lenders, the government can save about $68 billion over 10 years. What will some of those savings go towards?
A: A portion of the savings will go towards the Pell Grant Program, which provides need-based grants to low-income undergraduate students