Welcome to the "financial aid" blog. With
all the captivating topics to write about why would I focus my first
blog endeavor (ever!) on something as mundane as financial aid? Because far from being dull, the world of financial aid is filled with twists, turns and surprises. Don't believe me? Then let's talk about one of the biggest changes in the aid world for next academic year.
you look at your financial aid award letter for 2012-2013, you will
probably ask yourself the obvious question ... "where did my Subsidized
student loan go?". Historically,
Graduate level students have been offered a portion (presently $8,500
max) of their federal aid in the form a Subsidized loan with the benefit
of no interest building on the loan while the student is both enrolled in school and during the six month post enrollment grace period.
However, in President Obama's 2012-2013 budget proposal (March 2011) he recommended the
elimination of the interest subsidy of the Subsidized Federal Direct
Loans for Graduate and Professional students in an effort to utilize
those savings to strengthen the undergraduate Pell Grant program. Congress initially countered with a proposal for the dissolution of the subsidy for all (Undergraduate and Graduate) students. Ultimately
Section 502 of the Budget Control Act of 2011 (passed by Congress and
signed by President Obama in August ) finalized the elimination of the
Direct Subsidized loan for Graduate and Professional level students
The good news (in the short term) is that you will not lose loan funds. You
were eligible for a maximum of $20,500 in Direct loans in 2011-2012 and
you will be eligible for up to $20,500 in 2012-2013 as well. Only instead of $8,500 of the $20,500 eligible to be subsidized, the full amount is now unsubsidized. The
bad news (in the long term) is that because interest will now be
building on that formerly subsidized portion from the time of enrollment
and during the grace period, you will ultimately be carrying a higher
One other important aspect of Section 502 of the Budget Control Act of 2011 is that students will be losing the "origination fee rebate" which rewards on time payments on Direct (presently 1%) and Grad PLUS loans (presently 4%). The loss of the origination fee rebate will go into effect for any loan disbursed after July 1, 2012. The
interest rate reduction for borrowers who agree to have payments
automatically electronically debited from a bank account remain in
effect (remember that when you enter into repayment!) and has not changed in the new law.
The reality is that the elimination of the subsidy loan for Graduate students has been seriously discussed and considered for several years as
a budget savings measure and while it was a surprise for students (and
financial aid administrators ) that it was ultimately passed , it was
probably inevitable. Ultimately the Department of Education projects this measure will save an estimated $22 billion over the next ten years . Most significantly, $17
billion of those savings will address critical funding shortfalls for
the Pell Grant program which remains the cornerstone federal aid vehicle
to provide low income students access to post -secondary education.
So what are the most important things to remember/do about this change?
1) Understand that
this change only affects those loans in place for academic year
2012-2013 (or for loans made for periods of enrollment beginning
on/after July 1, 2012). The
subsidized terms and conditions on any previous Direct Subsidized loans
you received as an undergraduate or Graduate student to date remain as
is and are secure.
2) If you declined any or the entire Direct Subsidized loan offered to you for this current 2011-2012 year , you may wish to rethink about borrowing it. Even
if you do not need the funds immediately for this year, taking this
loan now and banking the funds may serve you better than having to
borrow the unsubsidized as your only option in a future academic year.
If you do wish to reconsider your aid award and accept the previously
award Subsidized loan, just contact our office.
more than ever you will want to take full advantage of COAP,
particularly since your interest and aggregate loan balance will be
higher without the benefits of the subsidy. Even
in your 1L or 2L year , make an appointment to talk with the financial
aid office about your loan balances, COAP eligibility and insure you are
on track to apply for COAP to coincide with your loan repayment.
although it has been said many times, many ways, make a concerted
effort to borrow only what you absolutely need to support yourself while
at YLS. Sacrificing now in an effort to minimize your loan burden later will ultimately reap benefits for your future. Again,
the Financial Aid Office can assist with helping you develop a viable
spending plan to insure that you have enough funds to both live on and
live well, while minimizing your loan borrowing.
So now that the FinAid blog is up and going , keep up with it as we report in upcoming posts other changes (beneficial changes!) in the works for the 2012-2013 academic year. Who knew financial aid could be so exciting!