Caveat Emptor or Buyer Beware 19: Challenges to Student Loans & More

Saturdays we share a tip or cautions to facilitate getting scholarships or avoiding problems

Elsie borrowed money each year to attend college. Her student debt exceeded $23,000. She plans on attending this fall for her last year of college. She contacted us last week. She expressed three concerns about her loans. First, that the interest rates for the last year will double. Second, she wondered if the interest rates on all previous loans would double. Third, she had heard that interest no longer began after graduation, but began the moment she received the loan. Her concerns reflect confusion many have at recent changes in federal student financial aid.

Recent Changes Made by Congress

Over the past two years congress made significant changes to the laws regulating student financial aid. Some of the changes include:

• 2011: They decreased the income levels to qualify for Pell Grants from $26K to $12K
• 2011: They reduced the number of grants you can receive from 18 to 12 semesters
• 2011: They doubled the interest rate from 3.4% to 6.8% for loans to graduate students
• 2011: They began accruing interest on graduate loans on the first day of the loan
• 2011: They eliminated grace periods for beginning loan payment on graduate loans
• 2012: They failed to prevent a doubling of interest rates on undergraduate loans

Uncertainty and Confusion Exists

Both the Obama administration and Congress combined to create challenges for some college students and their families. The President wanted to make college more affordable for poorer people. Congress wanted to reduce government spending and the debt. They were both able to accomplish parts of their plan.

• Lowering the income requirements for Pell Grants ensures money goes to poorer people
• Reducing the number of semesters spreads the money to more people & reduces the money given
• Increasing interest rates raises more money for the government and discourages many applications
• Beginning the interest accrual earlier also increases the amount of money earned

At this time, Congress still debates alternatives to doubling interest rate on undergraduate loans.

Monday we share NIH-Oxford-Cambridge Scholars Program as a source of financial aid

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