Federal Financial Aid Changes

Your EFC is what your family is responsible for paying out of all of your college costs, and it is based on your financial stability.

Change is on the horizon, and it has some folks concerned.  In July of this year, federal financial aid is getting a facelift.  What’s scary for some is that the rules are changing, which is an effort to reduce government spending.Let’s get a breakdown of major changes…

  • Education level and financial aid

Right now, students who did not graduate from high school or obtain a GED are able to move on to college level courses of study via specialized exams.  Alternatively, they may take 6 college credits to be deemed ready for full college study and receive financial aid.  Come July, all federal financial aid recipients MUST hold a high school diploma or GED.

  • Automatic Zero Expected Family Contribution (EFC)

Your EFC is what your family is responsible for paying out of all of your college costs, and it is based on your financial stability.  The lower your EFC (money out of YOUR pocket), the higher your financial aid eligibility (what you can receive from the government).  Previously, families with $32,000 or less in annual income were eligible to have their personal college costs waived.  With the change in July, this income limit takes a nosedive down to $23,000.  For the 2012-2013 academic year and beyond, students whose families earn less than $23,000 may have their EFC total zeroed, where those in the $32,000 camp will now find themselves owing more for school.

  • Length of time students will remain eligible for federal aid

As it stands currently, the maximum amount of time individual students have to complete a degree with the assistance of federal financial aid is 9 years.  New regulations will decrease this time to 6 years.  You will remain eligible for financial aid for 6 years, or 12 semesters, of full-time enrollment.  The previous standard allowed 9 years, or 18 semesters.  While some may wonder why it would ever take this long for someone to graduate, different life circumstances as well as academic performance must be taken into account (i.e. time off due to a death in the family, or your grades weren’t exactly stellar).  If a student is only part-time (less than 12 credits per semester), the limit changes to 12 years (student is only exhausting half of their potential aid).

  • Graduate student loan eligibility

Grad school is tough…and expensive.  Just like undergrads, these students rely heavily on loans to finance their education.  You may already know that loans, such as the Stafford, come in two forms: subsidized and unsubsidized.  Subsidized loans are need-based, and are a little less intimidating, given that the government handles  interest payments during school.  When you have a subsidized loan, the interest doesn’t grow while you’re in school.  Unsubsidized loans are helpful, though the interest that gathers over the years becomes money that you owe later (on top of your existing loan).  The change that is arriving for next year is that graduate and professional students will not be able to obtain subsidized loans from the government.

  • Subsidized Stafford Loan interest

One major change that has politicians, school officials and students in an uproar is the interest rate increase for this loan.  Currently capped at 3.4% interest when students go to repay it later, the subsidized Stafford loan will rapidly ascend to twice that—6.8%!  According to a law enacted by Bush in 2007, the initial rate was 6.8 and dropped, scheduled to return to normal for the next year.  Students at colleges like Stony Brook are pleading to the government, fearing the financial impact on their families.

There you have it.  Change is gonna come, and its coming soon.  Be sure to familiarize yourself with the full list of new rules for federal financial aid on the federal student aid site, and visit our solutions center for help with your financial aid needs!

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