Caveat Emptor or Buyer Beware 12: Changes in Federal Financial Aid

Saturdays we share tips or cautions to facilitate getting scholarships or avoiding problems

Mark enrolled in one of the top 20 graduate programs in education in the country. He worked full-time as a high school teacher. The graduate program cost a lot. Mark used his own money to pay part of the tuition, but took out a federally guaranteed Stafford Loan to augment his own cash. After he received the loan, Congress changed the rules on the loan. They doubled the interest from 3.4% to 6.8%. They also started accruing the interest at the beginning of the loan rather than 6 months after graduation. His costs increased by thousands of dollars because of the changes.

Intent of Changes Enacted in 2012

Congress enacted several changes to federal financial aid for students effective July 2012. They intended to accomplish several purposes:

• Decrease federal expenditures
• Make financial aid available to people who needed it the most
• Increase the number of low-income students who could receive financial aid
• Decrease funding to people who already received an education

• Enhance student success by not funding students with high-risk of dropping out

As with many attempts to initiate social change, mixed results occurred in the past year. Many students, like Mark, had stop going to school because of the changes. Others, who qualified, failed to take advantage of the opportunities provided in the changes.

Changes Enacted in 2012

Some of the changes enacted include:

You must have a high school diploma or GED. You cannot become eligible by passing an approved test or completing six credit hours of post secondary coursework

The lower a student’s expected family contribution, the higher the student’s federal student aid eligibility

You may only receive Pell Grants for 12 semesters instead of 16. Working students going to school part-time will not receive financial aid for all their schooling

Interest accrues during the grace period 

Income eligibility for Pell Grants decreased from $33,000 to $23,000

You may learn more about the changes at the Federal Student Aid web site.

Monday we review School Grants Blog as a source of student financial aid