If you plan to attend college and don’t have enough money saved to foot the bill, you might have to resort to getting a federal student loan. Don’t worry, most students need loans to help them pay for college and college expenses.
While obtaining a loan is simple enough, problems often arise when you are trying to pay it back. If you thought you knew everything there is to know about student loans, think again. Federal student loans are changing.
If you obtain a federal student loan after July 1, 2014, that loan will have a fixed interest rate for the entire life of the loan. The fixed interest rate only applies to new loans and is not carried over if you consolidate your new and old loans.
School Closing Protection
You might not think that a college could close down without giving any notice to students, but it can and does happen. When it happens, students are left with a loan and no education. In the past, if a student was enrolled within 90 days of the date a school closed and was unable to complete their credentials at another school, he or she was eligible to have the associated federal student loans discharged. New rules effective July 1,2014 expand that time frame to 120 days from the date the school closes.
Defaulted Loan Options
If you have defaulted on your student loan, you can start a rehabilitation process that will allow you to make payments on the loan based on what you can afford. Borrowers who start this process after July 1, 2014 will have their payment initially calculated under the 15 percent rule. If they can’t afford to pay back 15 percent of their income towards each payment, they can submit a hardship form to have their payments recalculated.
New Income Guidelines
Borrowers who take out new loans after July 1, 2014 will be eligible for the new version of the income-based repayment plan that caps their payments at no more than 10 percent. Any defaults will be forgiven after 20 years instead of the previous 25.
If you are considering a student loan to pay for college, these changes might affect you. Be sure to check into the new changes and rates before you sign the papers on your loan to be sure you know what you are getting yourself into.
Image via Wikimedia Commons