Federal government already funds loans for WWU students and parents
Congress recently made sweeping changes to the student loan industry, establishing the federal government as the primary lender for students borrowing money to attend college beginning July 1.
But WWU students and parents already borrow funds directly from the federal government, so they won’t see much of a change in borrowing, says Clara Capron, director of Financial Aid at WWU.
“We’ve been a Direct Loan institution since fall 1995,” Capron says. “We made the switch because we could clearly see that the Direct Loan program provided better service to students.”
Student loans beginning in 2014 will have more favorable repayment rates.
The financial savings from the reform will also bolster the federal Pell Grant program, which was facing a severe three-year shortfall of $18 billion at the beginning of 2010, the biggest in the 36-year history of the program, Capron said.
The funds will allow modest increases to Pell Grants, which serve the most financially needy students.
Meanwhile, student loans beginning in 2014 will have more favorable repayment rates. Payments will be no more than 10 percent of graduates’ monthly income, down from 15 percent now. And the debt will be forgiven after 20 years – down from 25 years now - or 10 years if graduates work in public service such as teaching, nursing or the military.
According to a White House report on the new student loan laws, payments would be reduced by more than $110 a month for single borrowers earning $30,000 a year and owing $20,000 in student loans, based on 2009 figures.
The legislation does not affect private, alternative education loans offered through banks and other lending institutions. Fewer than 3 percent of WWU students and parents seek such alternative loans through private lenders, Capron says.