Major Changes to Your Federal Student Aid in 2012-2013: What's Ahead
The government has been tightening its belt lately—and tightening its restrictions on student aid. Here are a few new developments for student aid in the 2012-2013 academic year that may affect you or a student you know.
Fewer people will qualify for a $0 EFC
The Expected Family Contribution (or EFC) is the amount the federal government expects your family to pay—either out of pocket or with private loans—after you have received all the federal aid you qualify for. In the past, if your family made $32,000 per year or less, you automatically qualified for an EFC of $0. In 2012-2013, you will be eligible only if your family makes less than $23,000 per year.
Limited Pell Grant eligibility
Federal Pell Grants are the best kind of federal aid you can get—because it’s a grant, not a loan,
and you don’t have to pay it back. Pell Grants are given out mostly to low-income applicants with demonstrated financial
need. Under the new rules, you will be able to receive Pell
Grant funding only for 12 semesters. If you’ve received Pell
Grant funding for 12 semesters already, your eligibility will
expire in the 2012-2013 school year regardless of your
For many students, new restrictions are set to make college a bit more difficult to pay for.
In the past, direct subsidized loans had the interest subsidized—meaning interest did not accumulate—during deferment or during the six-month grace period that occurs after you earn your degree online. If you take out a subsidized loan during the 2012-2013 school year, however, the interest will accumulate although you will not be expected to start making payments until six months after graduation or during deferment periods.
Interest rates go up
Subsidized loans currently have a fixed interest rate of 3.4%. Currently, that rate is set to jump to 6.8% for the 2012-2013 school year. President Obama has requested keeping the interest rate at 3.4% going forward, but agreement has not yet been reached to keep the interest at its current lower rate.
No more repayment incentives
In the past, the government was willing to slash interest rates for qualifying borrowers who met a certain number of regular payments. Going forward with loans originating on or after the 2012-2013 academic year, the Department of Education is actually prohibited from giving any repayment incentives to people with Direct Loans. This isn’t true for anyone who allows the government to automatically deduct the payments from their bank accounts, however—in that case, you may get a slightly reduced interest rate.
Only those with a GED or high school diploma qualify
In the past, it was possible to qualify for federal aid under certain circumstances if you did not have a high school diploma or GED. For the 2012-2013 academic year, this will no longer be possible. However, students who are admitted to college under the Ability to Benefit program, a testing program assessing the skills of students who did not go through the US secondary education system, can still qualify for federal aid.
For many students, new restrictions are set to make college a bit more difficult to pay for. Hopefully, as the economy improves, strictures such as these on federal student loan programs will relax and make the process of paying for college less onerous. In the meantime, students and their families should be prepared for upcoming changes starting in the new academic year.
StudentAid.ed.gov: Electronic Payment
Howard University: Federal Student Loan Changes for the 2012-2013 Academic Year
Alaska University: Important Changes to Federal Student Aid Programs
Distance-Education.org: How Your Financial Aid Will Change in 2012
Distance-Education.org: Federal Student Loan Interest Will Double in 2012: A Good or a Bad Thing?
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- Major Changes to Your Federal Student Aid in 2012-2013: What's Ahead