While it falls in the middle of summer on most academic calendars, July 1 marks an important date for financial aid each year. On July 1, the Education Department switches from the 2008-2009 academic year to the 2009-2010 one, and new federal rules for financial aid go into effect. This means new loan consolidation and repayment options, lower interest rates on some federal student loans, among other changes for students receiving federal student financial aid.
One big change you likely already know about if you have applied for financial aid for fall is that Pell grants are going up from a maximum of $4,731 for 2008-2009 to a maximum of $5,350 for 2009-2010. This change has already been widely publicized and is already reflected on your financial aid award letter.
Changes for current undergraduate students that you may not already know about include lower interest rates and lower loan fees on federal Stafford loans. The interest rate on subsidized Stafford loans for undergraduate students will drop from 6.0 percent to 5.6 percent on July first. Rates will not change for unsubsidized loans, graduate students, or federal PLUS loans. The upfront loan fees on all Stafford loans will fall from 2 percent to 1.5 percent. Students who have older Stafford loans or PLUS loans with variable interest rates will also see lower interest rates as of July 1, provided they have not already consolidated their loans.
Those who are considering loan consolidation will see one of the biggest changes on July 1, with the unveiling of a new consolidation program through the federal Direct Loans program. It will allow students to participate in an income-based repayment plan that will forgive any outstanding debt after 25 years. Payments will be capped at 15 percent of whatever you earn above 150 percent of the federal poverty level and no payments will be required if your earnings fall below 150 percent of the federal poverty level.
Finally, since July 1 marks the start of the new academic year for financial aid, today is the last day to file a 2008-2009 FAFSA. If you are planning to enroll in summer courses and have not yet applied for aid, you may want to check with your school to see whether summer is counted as part of 2008-2009 or 2009-2010 for financial aid purposes. If your school counts summer as part of the previous academic year and you have not yet filed a FAFSA, you will want to do so right now.