Every year, many of the federal financial aid regulations are up for review and approval by the federal government. The government maintains the right to modify all Title IV federal student aid regulations at any time during the year should there be budgetary or regulation issues that need to be addressed immediately. The Financial Aid Office will be able to answer any specific questions regarding how these changes might or might not affect you and your financial aid award for the upcoming school year.
Student Loan Forgiveness Linked to Income
Student loan forgiveness will now strictly be linked to student incomes and will impact a percentage which can be forgiven. Secretary of Education, Betsy Devos, explained in the announcement that “this improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly,” adding that it “also protects taxpayers from being forced to shoulder massive costs that may be unjustified.”
There is a sliding scale, based on the gainful employment data of their peers in the same program, as to how it could impact the percentage of forgiven loans. For example, students whose current earnings are less than 50 percent of their peers from a comparable postsecondary program will receive full relief. Students whose earnings are at 50 percent or more of their peers from a comparable postsecondary program will receive “proportionally tiered relief to compensate for the difference.” The underlying goal is to ensure that the loan discharge takes into consideration any benefit students did reap from their program.
Critics of the Department of Education’s Student Loan Discharge Reforms
The DeVos led ED team had been pushing for reforms ever since entering office and the new sliding scale system is not without its critics. “This is a bad idea for a host of reasons,” Ben Miller, the senior director for postsecondary education at the Center for American Progress, said on Twitter. “It ignores the question of whether you actually got a job in that field, what your long-term career prospects are, the massive cliff effects, and it’s comparing graduates to some potential dropouts.”
Alert: Borrowers on an IDR Plan Who Haven't Submitted Their Annual Renewal Documentation!
Borrowers on IDR plans that do not recertify their income and family size on time forces them into the Permanent Standard plan, which could result in a much higher monthly payment.
2018-2019 Direct Loan Origination Fees (October 1, 2018)
*NEW* 2018-2019 Direct Loan Interest Rates (July 1, 2018)
2017-2018 Direct Loan Interest Rates (July 1, 2017)
2017-2018 Direct Loan Orignation Fees (October 1, 2017)
Prior-Prior Year (PPY) FAFSA begining with AY2017-2018
2016-17 Direct Loan Interest Rates (July 1, 2016)
PLUS Loan Entrance Counseling Requirement effective March 29, 2015
2015-16 Direct Loan Interest Rates (July 1, 2015)
Further Impact of Sequestration on Student Loans (Nov. 2013)
Impact of the Government Shutdown on Federal Student Aid Systems (Oct. 2013)
Impact of Sequestration on Student Loans
Because the Budget Control Act of 2011 (the sequester law) remains in effect, Direct Loan fees will change for all Direct Loans disbusred on or after October 1, 2018. (Loan fee calculations that result in more than two decimal places must be truncated, not rounded to two digits after the decimal point (cents).
Direct Unsubsidized Loan Origination Fee on or after October 1, 2018 is 1.062%.
Direct PLUS Loan Origination Fee on or after October 1, 2018 is 4.248%.
The interest rate is determined annually for all loans first disbursed during any 12-month period beginning on July 1 and ending on June 30, and is equal to the high yield of the 10-year Treasury note auctioned at the final auction, plus a statutory add-on percentage that varies depending on the loan type.
- Direct Unsubsidized Loan: 6.60% (fixed interest rate)
- Direct Graduate PLUS Loan: 7.60% (fixed interest rate)
On May 10, 2017, the U.S. Treasury' 10-year Treasury note auction resulted in an increase in interest rates for federal student loans disbursed on or after July 1, 2017. The interest rates will be fixed for the life for the loan.
- Direct Graduate PLUS Loan: 7.00%
The origination fees for loans disbursed on or after October 1, 2017 are as follows:
- Direct Graduate PLUS Loan: 4.264%
In Fall 2015 the President announced two major changes to the Free Application for Federal Student Aid (FAFSA) process. While traditionally the FAFSA filing cycle begins on January 1 of the year preceding the award/academic year (e.g., January 1, 2016, for the 2016-2017 award/academic year), beginning with the 2017–2018 FAFSA cycle, the application will become available to students three months earlier on October 1 (e.g., October 1, 2016, for the 2017-2018 award/academic year.
The second change announced by the President is that, again beginning with the 2017-2018 cycle, the FAFSA will collect income information from the tax/calendar year one year earlier than has been used in the past. Thus for the 2017-2018 FAFSA, students will provide income information from calendar year 2015 and not from calendar year 2016. Because of this, almost all tax return filers will be able to electronically transfer their tax information directly into their FAFSA by using the IRS Data Retrieval Tool (DRT).
All graduate/processional PLUS loan borrowers who have a determination of adverse credit history from the Department of Education, but who are later successful in teh appeal of this determination, will be required to undergo special loan counseling prior to receiving their PLUS loans. This applies to all successfull graduate/professional students regardless of the method of the appeal. Those who were reconsidered based on extenuating circumstances or who obtained an endorser for the loan must complete the special counseling. This special counseling is separate from entrance counseling required of all borrowers. The Department of Education provides this additional counseling through www.studentloans.gov. We cannot disburse loan proceeds to a student subject to this new requirement until we have received confirmation of its completion.
2016-2017 Direct Loan Interest Rates
Federal student loan interest rates are reviewed by Congress each year and the results are tied to financial markets. The interest rates are effective each year for loans that have a first disbursement on or after July 1, 2016 through June 30, 2017. Knowing what your interest rates will be on the loans that you will borrow can dramatically help you in planning for your future. To ensure financial success you should know not only know how much your education costs NOW, but also how much you will OWE once you graduate.
- Direct Unsubsidized Loan: 5.31%
- Direct Graduate PLUS Loan: 6.31%
2015-2016 Direct Loan Interest Rates
Under section 455(b)(7) of the Higher Education Act (HEA), interest rates on Federal Direct Loans are set according to a formula that is based upon an auction of 10-year Treasury Notes. Separate interest rates are established each year for Direct Subsidized Loan, Direct Unsubsidized Loan, and Direct PLUS Loans for which the first disbursement is made on or after July 1 through the following June 30.
On Wednesday, May 13, 2015, the Treasury Department held a 10-year Treasury Note auction that resulted in a high yeld of 2.237%. Below displays the resultant interest rates for Direct Unsubsidized Loans and Direct PLUS Loans first disbursed on or after July 1, 2015 and before July 1, 2016.
- Direct Unsubsidized Loan: 5.84%
- Direct Graduate PLUS Loan: 6.84%
2015-2016 Direct Loan Fees
Because the Budget Control Act of 2011 (the sequester law) remains in effect, sequester-required changes for Federal fiscal year 2016 (FY 2016) will be required effective October 1, 2015. The terms of the sequester decrease the loan fees charged to Direct Loan borrowers for Direct Unsubsidized and Direct PLUS loans. For loans where the first disbursement is made on or after October 1, 2015 and before October 1, 2016
- The loan fee for a Direct Unsubsidized Loan is 1.068%. For example, the fee on a $20,500 loan will be $218.94.
- The loan fee for a Direct PLUS loan is 4.272%. For example, the fee on a $10,000 PLUS loan will be $427.20.
2014-15 Direct Loan Interest Rates
Last year, President Obama signed the Bipartisan Student Loan Certainty Act of 2013, which amended section 455(b) of the Higher Education Act (HEA) to provide new formulas for the determination of interest rates for all Federal Direct Loan types. Interest rates are established each year for Direct Unsubsidized and Direct PLUS Loans for which the first disbursement is on or after July 1 through the following June 30. The rate is the sum of a uniform "index rate" plus an "add-on" that varies depending the type of the loan and whether the borrower is an undergraduate or a graduate/professional student. Under the law, the index rate is determined each year as the "high yield of the 10-year Treasury note." The interest rate for a loan, once established, applies for the life of the loan - that is, the loan is a fixed-rate loan.
On Tuesday, May 7, 2014, the Treasury Department held a 10-year Treasury not auction that resulted in a high yield of 2.612%. Below displays the resultant interest rates for Direct Unsubsidized and Direct PLUS Loans first disbursed on or after July 1, 2014 and before July 1, 2015.
Direct Unsubsidized Loan: 6.21%
Direct Graduate Plus Loan: 7.21%
2013-14 Direct Loan Interest Rates
President Obama signed into law the Bipartisan Student Loan Certainty Act of 2013. The new law amends the Direct Loan interest rate section of the Higher Education Act of 1965, as amended (the HEA). Specifically, the new law amends section 455(b) of the HEA to provide new formulas for the determination of interest rates for all Direct Loan types for which the first disbursement is made on or after July 1, 2013. The new interest rate determination also applies to Direct Consolidation Loans for which the consolidation loan application was received by the Department on or after July 1, 2013.
Under this law, interest rates will be established each year for Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans for which the first disbursement is on or after July 1 through the following June 30. For the 2013-14 year, the fixed rates for graduate/professional students are as follows:
Direct Unsubsidized Loan: 5.41%
Direct Graduate Plus Loan: 6.41%
For more detailed interest rate information, visit http://studentaid.ed.gov/About/announcements/interest-rate.
On August 2, 2011, Congress passed the Budget Control Act of 2011, which put into place automatic federal budget cuts, known as a “sequester,” to take effect if Congress failed to enact legislation to reduce the Federal deficit by March 1, 2013. Because Congress did not act, these budget cuts are now in effect. Below is a summary of the impact of these budget cuts on federal student aid programs for graduate students:
- For a Direct Unsubsidized Loan, the loan (or origination) fee will increase from 1.0 percent of the principal amount of a loan to 1.051 percent. For example, the fee on a loan for $20,500 will be increased by $10.46 from $205.00 to $215.46.
- For a Direct Graduate PLUS Loan, the loan fee will increase from 4.0 percent to 4.204 percent. For example, the fee on a $3,000 Direct Graduate PLUS Loan will increase by $6.12 from $120 to $126.12.
For more information about the impact of sequestration on federal student aid programs, see https://studentloans.gov/myDirectLoan/images/SequestrationImpact.pdf.
While Department of Education offices are closed during the partial government shutdown, the majority of Title IV (Federal Student Aid) processors, contact centers, and Web sites remain operational. Students may continue to complete FAFSA applications, promissory notes, and entrance counseling and may continue to request and receive federal student aid. Additionally, all federal student loan servicing will remain operational and the Department will continue processing consolidation applications via the Direct Consolidation Loans website. Questions related to federal student aid processing during the government shutdown may be directed to the Consortial Financial Aid Office at email@example.com.
Under the Budget Control Act of 2011, additional sequester funding reductions took effect with the start of the 2014 Federal fiscal year (FY 2014). The information here applies to FY 2014 only:
As of October 1, 2013, the sequester increases the origination fees charged to Direct Loan borrowers beyond last year's increases. The new loan fee percentages will apply only with regard to loans where the first disbursement is made on or after December 1, 2013. The new loan fees are 1.072 percent for Direct Subsidized Loans and Direct Unsubsidized Loans and 4.288 percent for Direct PLUS Loans (both parent and graduate student PLUS Loans). The loan fees on Direct Loans where the first disbursement was or will be made on or after July 1, 2013 and prior to December 1, 2013 continue to be those noted below (see 'Sequestration and New 2013-14 Direct Loan Fees, below) - 1.051 percent for Direct Subsidized and Direct Unsubsidized Loans and 4.204 percent for Direct PLUS Loans, regardless of when any second or subsequent disbursements are made.
The increased loan fee percentages must be applied to any loan disbursement for a loan where the first disbursement will be made on or after December 1, 2013. This includes loans that will be made for the remainder of the 2013-2014 academic year and loans that will be made for summer 2014. At this time, we have no information about the amount of the loan fees for Direct Loans that will be first disbursed on or after October 1, 2014.