Direct Student Loan Changes
Beginning July 1, 2012, the in-school interest subsidy for graduate and professional students has been eliminated. In addition, repayment incentives and up-front interest rebates will no longer be offered. Interest may be deferred while students are enrolled at least half-time, but will continue to accrue and be added to the loan principal at repayment. The maximum Direct Stafford loan amount remains $20,500 for the academic year and the interest rate will remain unchanged at 6.8%
This change does not affect the terms and conditions of Subsidized Stafford Loans received for loan periods beginning before July 1, 2012. Interest will continue to be subsidized while students are enrolled at least half-time and during the six month grace period prior to repayment. More information about student loans, including calculators to estimate monthly payment amounts may be obtained at www.studentloans.gov.
Undergraduate Students – For Federal Direct Subsidized Stafford loans made on or after July 1, 2012, and before July 1, 2014, the interest subsidy will be payable by the student rather than subsidized by the federal government Interest subsidy during the six-month grace period is eliminated for new Stafford Loans made on or after July 1, 2012, and before July 1, 2014. The repayment period still begins 6 months after the student is no longer enrolled at least half-time, but interest that accrues during those six months will be payable by the student rather than be subsidized by the federal government.
The interest rates for subsidized Stafford loans for loan periods beginning after July 1, 2012 will remain at the current 3.4%.
In addition, the law eliminates the authority of the Department to offer any repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans, including any reduction in the interest rate or origination fee. As a result, the up-front interest rebate that has been provided to Direct Loan borrowers at the time of loan disbursement will not be offered on any Direct Loan with a first disbursement date that is on or after July 1, 2012. The law continues to authorize the Department to offer interest rate reductions to Direct Loan borrowers who agree to have payments automatically electronically debited.
Additional information on changes to the federal student aid programs can be found at