New Federal Student Loan Rules Take Effect

Although, most people do not suspect a thing, federal student loans were dramatically affected by the healthcare legislation which passed last year. It is unclear why Congress elected to include changes in federal direct student loan legislation in the bill, but they did. The new processes surrounding these loans are among the reasons why many people have been concerned about the new legislation passing.

Students are likely to rejoice at the new rules in student loan processing because they mostly work in the students’ favor. Federal and private lender rules are quite extensive and can be difficult to understand for the otherwise uninitiated. The new laws surrounding the loans are meant to make life easier for those who many not understand the process and the new laws make getting a loan much simpler. Now, students are even more likely to qualify for loans, and the repayment terms have been simplified as well.

Loan repayment is where most of the major changes occur in the new legislation; the amount to be repaid has even been affected. In previous years, students were not required to pay more than fifteen percent of their income toward their student loan payments each month. Students were required to pay back their loans within twenty-five years. However, the new legislation states that students are not required to pay more than ten percent of their income toward their monthly student loan payment. However, what has changed was the maximum number of years a student has to pay back the debt has been reduced to twenty years. The new laws were designed to save the government money; the government will no longer be subsidizing private lenders by promising that the money will be paid back. Previously, the government guaranteed repayment on student loans to private lenders. With the new legislation, the government no longer offers this guarantee to private lenders in the case that a student defaults on a loan. This is meant to inspire private lenders to offer fewer loans, because they are no longer guaranteed a return.

Another part of the legislation meant to benefit students allows for greater grants to be given out to low income students. The new laws allow students to qualify for grants of up to six thousand dollars each year. Previously, the maximum amount of money a student was granted each year was five thousand and three hundred dollars. The new legislation allows for changes at community colleges as well. These institutions must now offer more affordable re-training classes for people who have been unemployed for quite some time and need to change career paths. Obviously, these changes are meant to tackle the problems with unemployment that many people around the country have been facing.

If students are thrilled about the new laws, lenders are not so happy about it. The well-known lending giant Sallie Mae has complained that the new laws will force them to destroy about two thousand 500 hundred jobs. Only time will tell, however, just what kind of affect the new legislature is to have.