Consumer Guide to Changes in Federal Pell Grants
and Student Loans for 2012-13
On July 1 each year, planned changes to federal student aid,
including Pell Grants and student loans, go into effect. Incoming freshmen and
their families, students already in college or graduate school, and borrowers currently
repaying their loans need to know what to expect as they figure out how to pay
for school and manage their loans in the year ahead.
This consumer guide explains several important changes, both
to Pell Grant eligibility and the terms of new federal student loans, starting
July 1, 2012. A companion one-page
chart summarizes the terms for federal student and parent loans issued in 2012-13.
To apply for Pell Grants, student loans, and other federal
student aid, students can fill out the Free
Application for Federal Student Aid (FAFSA).
Federal Student Aid Eligibility Change
Students who enroll in college for the first time on or after July 1, 2012 must have a high school diploma or GED, or have been home schooled, to be eligible for federal student aid (federal grants, loans, and work-study). Students who were enrolled before July 1, 2012 are not affected by this change.
Change to Pell Grant Eligibility
Pell Grants are need-based federal grants available to both
full-time and part-time undergraduate students. They do not need to be repaid. For
the 2012-13 award year, the maximum Pell Grant remains at $5,550.
Federal Student Loan Changes
Federal student loans are a form of federal aid that must be
repaid. The main types of federal loans are Stafford, Grad PLUS, and Parent
The fixed interest rate will remain at
3.4% for new subsidized Stafford loans issued on or after July 1, 2012. This
rate was scheduled to rise to 6.8%, but Congress took last-minute action
to retain the lower rate for one more year. Subsidized Stafford loans go
to undergraduate students with financial need, and the government pays the
interest while they're in school.
New subsidized Stafford loans issued in
2012-13 will accrue interest during the six-month "grace period" after
students leave school. This will also be the case for loans issued in
2013-14. However, the federal government will continue to cover the
grace-period interest for all subsidized Stafford loans issued before July 1, 2012, and the
grace-period subsidy is scheduled to go back into effect for loans issued on
or after July 1, 2014.
only repayment incentive available is a 0.25% interest-rate reduction for
borrowers who agree to make automatic electronic payments from their bank
fixed interest rates for unsubsidized
Stafford, Grad PLUS, and Parent PLUS loans remain the same as in 2011-2012.
For more information, see 2012-13
Borrowers with Older Variable-Rate Loans: Rate Changes
unconsolidated Stafford and Parent PLUS loans borrowed before July 1, 2006 have
interest rates that reset each year. Borrowers with these older loans can
consolidate them to lock in a low fixed rate in 2012-13. However, borrowers
should be cautious about combining Stafford and Parent PLUS loans.
Consolidation loans that include Parent PLUS loans (as well as individual
Parent PLUS loans) are not eligible for Income-Based Repayment (IBR).
For 2012-13, the variable rate for Stafford loans
issued between July 1, 1998 and June 30, 2006 is 2.39% during repayment and 1.79%
during in-school, grace, or deferment periods. Any borrower with these loans
can consolidate at a fixed rate of 2.50% during 2012-13. If 2012 graduates have
these older loans, they can consolidate during their six-month grace period to
lock in an even lower rate of 1.88%.
multiple loans, the new fixed rate will be a weighted average of the rates
of the consolidated loans, rounded to the nearest eighth of a percentage
point. New consolidation loans are made through the Direct Loan program, and only
Direct loans qualify for Public Service Loan
Links to More Information
sure what kind of loan you have or whether you've already consolidated?
Check the National
Student Loan Data System to be sure. If you can't remember your PIN
number, you can get a new one.
If you have questions about federal student loans,
contact the Federal Student Aid Information Center toll free at 1-800-4-FED-AID.