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The Student Loan Makeover
The what, why, and how of student loan legislation
In March 2010, some big changes were made to the laws on Student Loans.
These changes were made to make things easier on students who need
government loans and to them money in the long run. A lot of these save
laws are pretty complex which is why we wrote this handy guide to help you
sort it all out.
The Student Aid and Fiscal Responsibility Act
The new laws and changes made to student loans given by the government
are grouped together in an act called the Student Aid and Fiscal Responsibility
Act, or SAFRA for short. There are two big advantages for students:
1) The government is giving larger amounts of money given to students through Pell Grants
2) The act makes paying back your student loans easier and, in most cases, cheaper.
Pell Grants
Pell Grants are given to students by the federal government to help pay for school. Unlike a loan, Pell Grants don’t
have to be repaid. They’re given to students based on their financial need. You apply, the government determines
how much you can receive, and that’s that.
The new SAFRA legislation increased the amount given away through Pell Grants. The maximum you can get in 2010
is $5,550. By 2017, it’ll be $5,975. The grant amount will increase starting in 2013 and every year after that based on
how the economy is doing.
Repaying Student Loans
Money that you get from the government in the form of loans has to be paid back. The new laws under SAFRA makes
doing that a little easier. Here’s how:
How much you have to pay
In many cases, how much you have to pay per month on your student loans is based on how much money you
make. In 2010, you have to pay 15% of your “discretionary income” (money you don’t use for essentials). In 2014,
you’ll only have to set aside and pay 10% of your discretionary income.
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How soon your is forgiven debt
If you pay back your loans according to the schedule and the amount the
government asks for, eventually they will be “forgiven,” or, canceled. That
means that you won’t have to pay the entire amount back as long as you make
the regular payments you’re supposed to. Right now, student loans are forgiven
after 25 years of regular payments. Starting in 2014, they’ll be forgiven after 20
years of regular payments.
Want more on SAFRA?
If you’d like to learn more about SAFRA, visit the House of Representatives’
Committee on Education and Labor’s Website and search for “SAFRA.” here
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