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Changes in Financial Aid (Part 1)

You have many things going for you with a future career in the health sciences. One you may not be aware of involves changes in financial aid designed to not only help you pay for your health sciences education, but also to help you effectively manage any student loans you borrow to pay for school.

Your Financial Aid Office is the best source of information on these changes and should always be your first point of contact when you apply for financial aid. Here are some recent changes you should be aware of:

Changes in How You Apply for Financial Aid

The Free Application for Federal Student Aid (FAFSA) is the key document for anyone applying for federal financial aid. Recent changes have simplified the form, making it easier to complete by allowing for the transfer of IRS data onto the FAFSA, eliminating some questions for low-income students, and making it easier for students who are married or over 23 to complete the form.  See www.FAFSA.ed.gov for more details.

Where Your Student Loans Come From

One major change involves where you get your student loans.  Federal Stafford Loans (both Subsidized and Unsubsidized), Parent PLUS and Grad PLUS Loans, and Federal Consolidation Loans are now originated by the federal government through their Direct Loan Program. Private lenders such as banks and credit unions are no longer making federal loans. First-time borrowers may find it easier to keep track of their borrowing since any loans they take out in these programs will be with one lender: the federal government.

Lower Interest Rates and Lower Fees

Interest rates on Subsidized Stafford Loans for undergraduate students have been dropping over the past few years, helping to reduce the cost of borrowing, and rates are changing again. The rate on new Subsidized Stafford Loans for undergraduates during 2011-12 academic year will be fixed at 3.4%, down from 4.5% the previous year.  In addition, the origination fee (taken as a percentage of the loan) on all Federal Stafford Loans is currently only 1.0% for loans borrowed on or after July 1, 2010, down from 1.5% the previous year.

Repayment Help

The majority of borrowers from health sciences programs are able to effectively manage their student loans when they graduate and move into their careers. While no doubt due to responsible borrowing and effective debt management and budgeting skills, it is also due to a variety of programs designed to help all borrowers manage their loans when they enter repayment and improvements in these programs:

·         Changes in online debt management tools for your Direct Loans

·         Increased repayment amounts in the National Health Service Corps (NHSC) Loan Repayment Program

·         Changes designed to improve access to the Primary Care Loans for eligible medical school borrowers

·         Upcoming changes in the new Income Based Repayment (IBR) plan designed to lower payments for eligible borrowers

See your Financial Aid Office for more information on these and other changes.

Private Loans

Students should always exhaust their eligibility for federal student loans before applying for a private education loan. Federal loans have more flexibility with options for repayment and postponing payments (when needed) than private loans, plus opportunities for loan forgiveness that do not apply to private loans.

There have been recent changes with private education loans that should help:

  • New requirements for private loan lenders to provide more information to borrowers about the terms and conditions of their loans through what are called Disclosure Statements.
  • New Consumer Financial Protection Bureau that has oversight of private education loans and that should help ensure borrowers are always in the know regarding how their private loans work.

While it is ultimately your responsibility to know how your financial aid works, especially your student loans, you should take comfort in knowing that you have help.

This article was written by Paul S. Garrard, President and Founder of PGPresents, LLC; a 27 year veteran of student financial aid and higher education.