TICAS Creates Consumer Guide to July 1, 2012 Changes
Congress may have temporarily prevented the July 1, 2012 interest rate hike for subsidized Stafford loans, but that didn’t stop several other changes to federal student aid from taking effect this month.
A consumer guide created by the Institute for College Access & Success (TICAS) explains these important changes, both to Pell Grant eligibility and federal student loans:
- The maximum Pell Grant award will remain at $5,550 for the 2012-13 award year, however, the maximum number of equivalent full-time semesters a student is eligible to receive a Pell Grant will drop from 18 to 12 semesters. This limit applies immediately to all students, and contains no grandfather clause.
- Congress eliminated ability-to-benefit (ATB) options for establishing general student eligibility for Title IV funds for students who first enroll in a program of study on or after July 1, 2012. Students who enroll for the first time on or after July 1, 2012 must have a high school diploma or GED, or have been home schooled, to qualify for federal student aid. Students who were enrolled before July 1, 2012 are not affected by this change.
- Congress extended the fixed interest rate of 3.4 percent for new subsidized Stafford loans issued on or after July 1, 2012. This rate was scheduled to rise to 6.8 percent, but Congress took last-minute action to extend the lower rate for one more year.
- In the fiscal year (FY) 2012 budget, Congress temporarily eliminated the interest subsidy on undergraduate subsidized Stafford loans during the six-month grace period. The grace-period subsidy is scheduled to be reinstated for loans issued after July 1, 2014.
- Subsidized loan eligibility has been eliminated for graduate and professional students effective with enrollment periods beginning on or after July 1, 2012.
- The only repayment incentive available is a 0.25 percent interest-rate reduction for borrowers who agree to make automatic electronic payments from their bank account.
- The fixed interest rates for unsubsidized Stafford, Grad PLUS and Parent PLUS loans remain the same as in 2011-12. See TICAS’ 2012-13 loan terms document.
The guide also includes a number of changes to federal loan repayment programs, including all unconsolidated Stafford and Parent PLUS loans borrowed before July 1, 2006. The loans have variable interest rates that reset each year. Borrowers with these older loans can consolidate them to lock in a low fixed rate in 2012-13.