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The Student Loan Makeover The what, why, and how of student loan legislation In March 2010, some big changes were made to the laws on Student Loans. These changes were made to make things easier on students who need government loans and to save them money in the long run. A lot of these laws are pretty complex which is why we wrote this handy guide to help you sort it all out. The Student Aid and Fiscal Responsibility Act The new laws and changes made to student loans given by the government are grouped together in an act called the Student Aid and Fiscal Responsibility Act, or SAFRA for short. There are two big advantages for students: 1) The government is giving larger amounts of money given to students through Pell Grants 2) The act makes paying back your student loans easier and, in most cases, cheaper. Pell Grants Pell Grants are given to students by the federal government to help pay for school. Unlike a loan, Pell Grants don’t have to be repaid. They’re given to students based on their financial need. You apply, the government determines how much you can receive, and that’s that. The new SAFRA legislation increased the amount given away through Pell Grants. The maximum you can get in 2010 is $5,550. By 2017, it’ll be $5,975. The grant amount will increase starting in 2013 and every year after that based on how the economy is doing. Repaying Student Loans Money that you get from the government in the form of loans has to be paid back. The new laws under SAFRA makes doing that a little easier. Here’s how: How much you have to pay In many cases, how much you have to pay per month on your student loans is based on how much money you make. In 2010, you have to pay 15% of your “discretionary income” (money you don’t use for essentials). In 2014, you’ll only have to set aside and pay 10% of your discretionary income.


How soon your debt is forgiven If you pay back your loans according to the schedule and the amount the government asks for, eventually they will be “forgiven,” or, canceled. That means that you won’t have to pay the entire amount back as long as you make the regular payments you’re supposed to. Right now, student loans are forgiven after 25 years of regular payments. Starting in 2014, they’ll be forgiven after 20 years of regular payments. Want more on SAFRA? If you’d like to learn more about SAFRA, visit the House of Representatives’ Committee on Education and Labor’s Website here and search for “SAFRA.”


09 The Student Loan Makeover