Although we have the same president and Congress is still firmly split, there may be some significant changes in financial aid awards starting next year, unless Congress takes action. If you are a college student who depends upon government financial aid, here is what you need to look for in the coming year:
Students who borrow subsidized Stafford loans may see a sharp increase in the interest rates. Currently, the interest on these loans is around 3.4%. The rate was kept low last year due to a delay that was supported by both parties. Since the decision cost the government around $6 billion dollars, it is unlikely that the low rate will be further extended. If it is not, loans taken after July 1 of next year will have an interest rate of 6.8%
President Obama requested an increase in the maximum allowable Pell grant award to $5,635 for the next school year. The President has expressed interest in continuing expansion of Pell grant funding for students with financial need, but the Budget Control Act of 2011 is sure to cut spending dramatically for the Pell grant program unless Congress takes other measures.
Currently, the American Opportunity Tax Credit provides families with as much as $2,500 in tax credits for college expenses. The credit is due to expire at the end of this year, but President Obama is requesting that the tax credit be extended permanently.
The final version of the Pay As You Earn repayment plan was released last week. President Obama is a strong supporter of this plan and will likely be fast-tracking this improved version, which allows students to repay loans based on income and to have a portion of the debt forgiven after 20 years.
Big changes are on the horizon for college students. Whether these changes will be good or bad depends largely on the actions taken by Congress and the President. If you are a college student, or intend to start college soon, it is a good idea to keep an eye on these developments so you can better plan for your future.The current administration will continue pushing for increased transparency regarding college costs. The purpose of these measures is to make it simple for students and their families to understand the actual cost of attendance, available aid, and outcomes so they can easily compare their college options. One of these measures, the Financial Aid Shopping Sheet will be sent out by hundreds of colleges for the next school year.