Federal Student Loan Changes 2012-2013

The Budget Control Act of 2011 was signed into law on August 2, 2011. Beginning July 1 2012, this act makes two major changes to the Federal Direct Loan Program:

Elimination of the subsidized loan program for graduate students
Beginning July 1, 2012, there will no longer be an interest subsidy on subsidized student loans for graduate students while a borrower is in school, in the post-school grace period, and during any authorized deferment period. Graduate students will no longer be eligible to receive subsidized student loans.

The current annual and cumulative loans limits for unsubsidized student loans would be adjusted to permit students to borrow additional funds in the unsubsidized loan program. The annual loan limit remains unchanged at $20,500.

Elimination of loan repayment incentives
Beginning July 1, 2012, incentive payments to encourage the on-time repayment of a borrower's federal loans will be eliminated. Specifically, the Act will eliminate the Secretary of Education's authority to offer a partial rebate of the origination fee but would still allow the current interest rate reductionfor borrowers who agree to repay their loans through electronic debiting.