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July 14, 2010

July 1, 2010, Federal Student Loan Changes

Several changes that could impact federal student loan borrowers began July 1, 2010. American Student Assistance® (ASA) has answered the following commonly asked questions to help you understand these changes.

Is it true all U.S. student loans will now come directly from the government?

Yes. Starting July 1, 2010, the U.S. Department of Education (ED) will be the sole provider of federal student loans. Loan origination through the Federal Family Education Loan Program (FFELP) has been eliminated.

Have student loan interest rates dropped?

Yes, there have been changes to some interest rates on federal student loans. Loans with variable (or fluctuating) interest rates have new, lower rates beginning July 1, 2010. 

Additionally, undergraduate subsidized loans first disbursed on or after July 1, 2010, will have a fixed (set for the life of the loan) rate of 4.5%—a drop from the 5.6% fixed rate on these types of loans that were first disbursed on or after July 1, 2009, and before July 1, 2010.

For a complete list of student loan interest rates, see our student loan interest chart.

Have there been changes to income-based repayment?

Yes, 2 important income-based repayment (IBR) changes went into effect.

  • New calculation for married borrowers. For married borrowers who file their taxes jointly, lenders will factor in the couple's total eligible federal student loan debt, along with their total income, to calculate payments. This means that more married borrowers will qualify for IBR—if you weren't eligible in the past, you may be eligible now.
  • Loan interest now taken into consideration. IBR eligibility will be based on either the loan amount on eligible loans when they first entered repayment or on the current loan amount, whichever is greater. This will allow borrowers whose loan balances have increased (often due to accrued interest during periods of deferment or forbearance) to qualify based on the amount they actually owe.

As a result of these changes, some people who were not eligible for IBR last year could be eligible now. Learn more about IBR and calculate what your IBR loan payments could look like.

Are there new eligibility requirements for a total and permanent disability discharge?

Yes. As of July 1, 2010, you will need one of the following to qualify for total and permanent disability (TPD):

  • The secretary of veterans affairs must determine you to be unemployable due to a service-connected disability.
  • Your doctor must certify that you are unable to engage in substantial gainful activity due to physical or mental impairment. Your impairment must be expected to result in death, to last for a continuous period of at least 60 months, or has already lasted for a continuous period of at least 60 months.

Read more about these new TPD regulations and download a Total and Permanent Disability Discharge Application (pdf, 0.49 MB).

 
 

Substantial Gainful Activity

A level of work performed for pay or profit that involves doing significant physical or mental activities, or combination of both. “For profit” is intended to cover self-employed individuals who are not paid by an employer. It does not refer to income from sources other than employment. Non-employment income will not be considered when determining whether a borrower is capable of substantial gainful activity.

 

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