Program Could Reduce Student Loan Payments, Interest Rates Changes to federal student loan programs announced in October are designed to lower interest rates, cap monthly student loan payments, or both, for eligible borrowers beginning in 2012. Eligibility for these new programs is complicated, based on the borrower’s income, family size, and other factors. The overall loan debt for ... Policy Analysis
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Policy Analysis  |   November 01, 2011
Program Could Reduce Student Loan Payments, Interest Rates
Author Notes
  • Neil Snyder, director of federal advocacy, can be reached at 800-498-2071, ext. 5614, or nsnyder@asha.org.
    Neil Snyder, director of federal advocacy, can be reached at 800-498-2071, ext. 5614, or nsnyder@asha.org.×
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Regulatory, Legislative & Advocacy / Policy Analysis
Policy Analysis   |   November 01, 2011
Program Could Reduce Student Loan Payments, Interest Rates
The ASHA Leader, November 2011, Vol. 16, 30. doi:10.1044/leader.PA4.16152011.30
The ASHA Leader, November 2011, Vol. 16, 30. doi:10.1044/leader.PA4.16152011.30
Changes to federal student loan programs announced in October are designed to lower interest rates, cap monthly student loan payments, or both, for eligible borrowers beginning in 2012.
Eligibility for these new programs is complicated, based on the borrower’s income, family size, and other factors. The overall loan debt for eligible borrowers may not be reduced (because smaller monthly payments may translate into a longer loan repayment period and thus more interest on the loan). The proposed changes affect borrowers with federal direct loans only, not private loans. Borrowers are strongly encouraged to check with their lenders or refer to information posted at the Department of Education’s student aid webpage.
  • Individuals who borrow in 2012 or later (future students) are eligible to enroll. In addition, individuals who borrowed after 2008 AND in 2012 (current students) are eligible.

  • Under the new 10% repayment cap (formerly 15%), loan repayments for low-income borrowers may not exceed 10% of the borrowers’ gross annual income. Borrowers should consult the Department of Education’s website to determine how to calculate their annual income and eligibility for the cap.

  • Low-income borrowers who are not current or future students may still qualify for the 15% cap on payments.

  • Low-income graduate students, who tend to have higher student loan debt compared to undergraduates, may benefit by enrolling in the Public Service Loan Forgiveness Program. Enrollees who make 120 consecutive loan payments, work in a public service setting for 10 years, and still have a loan balance may apply for forgiveness of that balance. Only federal direct loans recipients are eligible for this program. The 120 payment/10-year clock starts with the borrower’s first payment or with payments made after July 1, 2008, whichever came first.

  • Borrowers of Federal Family Education Loans (non-direct loans from a bank or Sallie Mae) will be eligible to consolidate those loans into the Direct Loan program and receive a 0.5% interest rate reduction.

President Barack Obama made the changes in advance of similar changes scheduled to take effect in 2014, and the administration claims that more than 1.5 million current college students and borrowers will see their monthly student loan payments fall.
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November 2011
Volume 16, Issue 15