The rise in the student loan debt has been the most significant in the last few years. It has now surpassed the credit card debt with an average graduate owing $ 23, 186. This has prompted the Federal Government to make some major changes in the student loans sector to make the student loans more affordable.
The new reforms, which took effect from July 1, 2010, will allow students to have greater access to student loans by reducing the difficulty of procuring and filing out the forms.
Key features of the new student loan regulations
The key features of the new regulations for student loans are as follows:
Easier application process:
The new regulations have eased the application process for the loans. The recent electronic version of the FAFSA has eliminated several redundant questions which were, often confusing. Moreover, multiple applications and promissory notes are not required anymore.
Banks are taken out of the process:
Banks will no longer be able to offer federally backed student loans. Now, the students will be able to take student loans directly from the Government. So, expect lesser hassles and even lesser fees.
Easy access to Pell Grants:
Under the new regulations, Pell Grants will be more accessible to students. The maximum grant amount has been increased to $5,500 for 2010-2011 and will be increased to nearly $6,000 by 2020.
Easy interest rates & repayment periods:
The federally backed student loans will have lower interest rates in the coming year. The Government has projected that the interest rates of the federal student loans will drop to 3.4% by 2011. Moreover, under the new regulations, loans issued after 2014 will have a repayment period of maximum 20 years. Public servants, such as teachers and police officers, can have their remaining loan debt forgiven after 10 years of regular repayment.
Easier payment percentages:
Federal student loans, taken after 2014, will have a repayment percentage capped at 10% of monthly income, down from 15% present percentage level.
Special benefits for parents:
The new regulations also have special benefits for the parents of undergraduate students who borrow PLUS loans. The parents will enjoy a simple application process along with lower interest rates.
According to the Obama Administration, the new student loan regulations will help students to easily qualify for the student loans and the easy repayment process will lessen the number of defaults during repayment. Thus, hopefully, the new student loan regulations will help to lessen the student loan debts in the coming years.