Student loans to change this summer

Pitt students will have to change the way they apply for some loans after the recent passage… Pitt students will have to change the way they apply for some loans after the recent passage of health care reform legislation.

Beginning July 1, the government will take over the distribution of student loans, including the most popular Stafford Student Loan.

For Pitt students, this change means they will now need to complete an entrance interview and sign a Master Promissory Note — a contract stating that they will pay back the Stafford Loan in full — with the U.S. Department of Education before receiving their Stafford Loan. Both these steps can be completed online at www.StudentLoans.gov.

Before the change, private lenders and banks held the responsibility for loan distribution. The government encouraged lenders to provide students with loans by granting the lenders subsidies.

Suzanne McColloch, senior associate director in the Office of Admissions and Financial Aid, said she thinks the change will benefit Pitt students. “The processing will be more efficient and less confusing because students and financial aid offices will be dealing with only one lender and one guarantee agency — the U.S. Department of Education,” she said.

This shift in control of student loans is based on The Health Care and Education Reconciliation Act of 2010 passed last month.

Under the new policy, all undergraduate students will be eligible for Stafford Loans of at least $5,500 and up to $12,500. Graduate students are entitled to loans as high as $20,500 per year. Also, the interest rate on these loans will not exceed 6.8 percent per year. Students considered to be “needy” can be awarded lower interest rates by the lender. The lender determines need based mostly on the student’s FAFSA forms on a case-by-case basis.

The Congressional Budget Office estimated the national treasury will gain $60 million over the next 10 years in taking control of student loans. The government aims to create more and larger Pell Grants with the money saved by eliminating the subsidies on Stafford Loans. Pell Grants are monies awarded to students with family incomes below $45,000 a year that do not need to be paid back.

McColloch encouraged students to complete the necessary processes for the Stafford Loans as soon as possible, even if they are not sure they will need student loan funds for future terms. She said there will be no cost or penalty for applying if the entrance interview and Master Promissory Note are completed and a loan is awarded.