What’s On The Horizon For Financial Aid?

President Bush and Congress recently passed the Deficit Reduction Act of 2005 that will greatly affect financial aid for college students beginning July 1, 2006. A summary of those provisions are listed below.

Pell Grant

• The maximum Pell Grant for 2006-2007 will remain at $4,050
• Pell eligible students who had successfully completed a “rigorous” high school program (as determined by the state higher education agency and recognized by the Secretary of Education) and enrolled full-time in the first two years of a postsecondary program are now eligible to receive up to $750 for the first year and $1,300 for the second year in the newly created Academic Competitiveness Grant.
• Pell eligible students who are majoring in physical, life, or computer sciences, mathematics, technology, engineering or a foreign language deemed critical for national security and enrolled full-time in the third or fourth years of a postsecondary program are now eligible to receive up to $4,000 for each year in the newly created National Science and Mathematics Access to Retain Talent Grant or National SMART Grant.
• Both the Academic Competitiveness and National SMART grants are in addition to the student’s Pell Grant award.

Stafford Loans

• Beginning July 1, 2006, interest rates for Stafford loans disbursed on or after this date will be fixed at 6.8%.
  
• Beginning July 1, 2007, Stafford loans originated on or after this date will have expanded annual loan limits. They are as follows:
  • Undergraduate freshman limit increased to $3,500 from $2,625
  • Undergraduate sophomore limit increased to $4,500 from $3,500
  • Graduate level unsubsidized limit increased to $12,000 from $10,000
• In the FFELP, Stafford loan origination fees will be totally phased out by 2010. Reductions to Stafford loan origination fees will follow this schedule:
  • Dropped to 2% on July 1, 2006
  • Dropped to 1.5% on July 1, 2007
  • Dropped to 1.0% on July 1, 2008
  • Dropped to 0.5% on July 1, 2009
  • Dropped to 0.0 % on July 1, 2010
  • (The 1% guaranty fee or default fee will remain in place at all times)
• In the FDLP, Stafford fees will be reduced on the following schedule:
  • Dropped to 3% before July 1, 2007
  • Dropped to 2.5% on July 1, 2007
  • Dropped to 2.0% on July 1, 2008
  • Dropped to 1.5% on July 1, 2009
  • Dropped to 1.0% on July 1, 2010

PLUS Loans

• Beginning July 1, 2006, graduate students will be allowed to borrower under the PLUS loan program.
  
• Beginning July 1, 2006, the interest rate on PLUS loans disbursed on or after this date will be fixed at 8.5%.
  
• PLUS origination and guaranty fees will remain at 3% and 1% respectively.