Federal Student Loans
 |
|
|
Related Resources
AAMC Documents
|
|
Current Status
On August 14, 2008, President Bush signed the "Higher Education
Opportunity Act" (P.L. 110-315), completing the first Higher
Education Act (HEA) reauthorization since 1998. [see
Higher Education Act Reauthorization] Among other provisions,
P.L. 110-315 reauthorizes the Perkins loan program through FY 2015
at $300 million, a $50 million (20 percent) increase over the current
authorization level. The bill also increases the annual Perkins
loan limit for graduate/professional students from $6,000 to $8,000
and provides a corresponding increase in the aggregate (lifetime
combined graduate and undergraduate) loan limit for graduate/professional
students from $40,000 to $60,000.
On April 14, 2008, the Department of Education (ED) issued a Dear
Colleague letter (GEN-08-04) that raises the combined aggregate
Stafford loan limit for certain health professions students (including
medical students) from $189,125 to $224,000, effective April 14,
2008. This increase is entirely in unsubsidized Stafford loans and
will allow medical students to borrow at a 6.8 percent interest
rate, avoiding higher rates under the GradPLUS and private loans.
The increase comes in response to a Sept. 4, 2007, AAMC-coordinated
sign-on letter to Secretary of Education Margaret Spellings. The
Secretary originally announced the Department's decision in a Feb.
28 letter to AAMC President and CEO Darrel G. Kirch, M.D.
Background
The Department of Education administers several loan programs
for which medical students may be eligible. The majority of these
programs are authorized under Title IV of the Higher Education Act
(HEA). The two most popular programs are the Federal Family Edcuation
Loan (FFEL)and Direct Loan programs.
Federal FFEL and Direct Stafford Loans
The Department of Education offers subsidized and unsubsidized Stafford
loans for graduate/professional students that have better interest
rates and loan terms than many private loans. Stafford loans for
graduate/professional students have a fixed 6.8 percent interest
rate. Health professions students may borrow up to $224,000 in Stafford
loans. Students are not required to make payments while in school,
and the government pays the interest on subsidized Stafford loans
during that period. Subsidized Stafford loans for graduate/professional
students are limited to $8,500 annually and $65,500 in total (including
undergraduate subsidized Stafford loans). Unsubsidized Stafford
loans for Health Professions Students are limited to $32,000 annually.
GradPLUS Loans
Graduate students may also take out GradPLUS loans, which are unsubsidized
loans with a fixed 7.9 percent (Direct) or 8.5 percent (FFEL) interest
rates. GradPLUS loans are limited to the total Cost of Attendance
as determined by the institution.
Federal Perkins Loan Program
A Federal Perkins loan is a low interest (5 percent) loan for undergraduate
and graduate students with "exceptional" financial need.
The Department of Education provides a programmed amount of funding
to the participating institution. In turn, the school determines
which students have the greatest need. The school combines federal
funds with some of its own funds for loans to qualifying students.
Perkins loans do not have origination fees and carry a longer Grace
period (9 months) then other federal loans. Financial need is determined
by a standard formula using information from the Department of Education's
Free Application for Federal Student Aid (FAFSA) and the student's
expected family contribution (EFC).
On February 8, 2006, President Bush signed the "Deficit Reduction
Act of 2005" (P.L. 109-171), which amends many of the student
loan provisions under HEA. Of particular interest to medical schools,
P.L. 109-171:
- extended authority for FFEL program through 2012;
- expanded the loan eligibility for the federal Parent Loan for
Undergraduate Students (PLUS) loan program to include graduate
and professional students (now "GradPLUS");
- increased annual unsubsidized Stafford loan limits for graduate
and professional students from $10,000 to $12,000;
- increased the interest rate for a PLUS loan in the FFEL from
7.9 percent to 8.5 percent;
- created a parallel fee structure for the FFEL and Direct Loan
programs, incrementally reducing net borrower loan fees in both
the FFEL and DL over the next 5 years to 1 percent in 2010;
- repealed spousal and in-school consolidation of FFEL and Direct
loans;
- limited "School as Lender" programs to Stafford Loans
for graduate and professional students; and
- allowed the one time cost of obtaining the first professional
credentials to be included in total cost of attendance for students
enrolled in a program requiring professional licensure or certification.
On June 15, 2006, President Bush signed a FY 2006 Emergency Supplemental
Appropriations bill (P.L. 109-234), repealing the single-holder
rule. The single-holder rule restricted consolidation of loans under
the FFEL by prohibiting borrowers whose FFEL loans are currently
with a single lender from consolidating under different lenders.
AAMC Activity
The AAMC coordinated a group of almost 60 health professions associations
in a September 4, 2007, letter to U.S. Secretary of Education Margaret
Spellings urging her to increase the aggregate combined Stafford
loan limit for health professions students from $189,125 to $223,793.
The letter notes that "the aggregate combined Stafford loan
limit for health professions students has remained stagnant for
over a decade, does not account for recent increases in annual unsubsidized
Stafford loan limits or reflect programs of different duration,
and is not defined in regulation."
On July 11, 2007, AAMC President and CEO Darrell G. Kirch sent
a comment letter to the House Education and Labor Committee and
the Senate Health, Education, Labor and Pensions Committee regarding
the proposed HEA reauthorization packages. The letter recommends
"increasing the annual subsidized Stafford loan limit for graduate/professional
students from $8,500 to $12,000, with comparable increases in the
aggregate loan limits."
Contacts
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
|
