Getting a college education remains an aspiration for millions of Americans. Getting that education financed is becoming more challenging as the federal government continues to make changes to longstanding federal student loan programs.
For one, starting in May of this year the U.S. government began collection efforts for student loans that were in default. The prior administration had granted certain forgiveness for student loan debt. Some of that has gone away, so current student loan borrowers must not count on forgiveness in the future.
Beyond that change, pending legislation in Congress includes a number of proposals that will alter existing federal student loan programs. These include:
- Changes to federal subsidized student loans. Subsidized student loans entail the government paying the interest on the loan while the student is in school and for a six-month grace period after graduating. This makes it a 0% loan for students while in school. The legislation could reduce or eliminate the amount of subsidized student loans a student could get, thus requiring students to find other funding for tuition cost.
- Parents capped out. The popular Parent PLUS loan program would go from having an uncapped borrowing capacity to $50,000 per parent for of their children
- Tougher to get graduate loans. Under the legislation, Graduate PLUS loans, which students can use to cover the full cost of graduate school and professional level education, would be eliminated.
- Limits on deferment and forbearance. Currently federal student loan borrowers can request deferment of payments for up to three years due to economic hardship. That ability may be greatly reduced by the new legislation. There will be a new Repayment Assistance Plan which will require participants to pay between 1% and 10% of their income toward their loans, with higher earners owing more.
- And many more potential changes…
While we won’t know all the specifics on these changes until the legislation passes, it’s clear that federal student loans will be curtailed. This will require more students and parents to look to private student loans. Private student loans provide a great option to fill the funding gap after all grants, scholarships and subsidies are awarded to the student.
Your credit union wants to assist our students and families in navigating the financing of college, so coming next month we will be launching private student loans. They will come in two flavors. One for students going or currently in school to fund their ongoing tuition costs. The second will be for refinancing existing student loans to simplify and consolidate student loan debt. Many students who graduated with multiple student loans are seeking to refinance as they start their careers.
As always, the credit union takes great care in offering high-quality, low-cost loan products and this will be no different. If you are interested in student financing, please be on the lookout for our communications later this summer when we launch the program. We will be hosting a webinar to answer common student financing questions and to talk about the loan offerings.
Paul Gentile
President/CEO
