Changes to Federal Student Loans for Graduate and Professional Students
The Budget Control Act (BCA) of 2011 was signed into law on August 2, 2011. This act makes two changes to the Federal Direct Stafford Loan Program.
Loss of Subsidized Loan eligibility for Graduate and Professional students
Effective for loans made for periods of enrollment (loan periods) beginning on or after July 1, 2012, graduate and professional students are no longer eligible to receive Federal Direct Subsidized Loans.
The terms and conditions of Direct Subsidized Loans received by any student for loan periods beginning before July 1, 2012, for either graduate or undergraduate study, are not affected by this change.
The annual loan limit for graduate and professional students remains unchanged at $20,500, but this amount will now be limited to Direct Unsubsidized Loans, as shown in the following chart
|Annual loan limits for Graduate/Professional students|
|before July 1, 2012||on or after July 1, 2012|
|Subsidized loan maximum||Unsubsidized loan maximum||Subsidized loan maximum||Unsubsidized loan maximum|
|$8,500||$20,500, less any subsidized loan amount received||$0||$20,500|
The aggregate loan limit for graduate and professional students remains unchanged at $138,500 not more than $65,500 of which may be in subsidized loans.
The elimination of subsidized loan eligibility for graduate and professional students does not affect undergraduate student borrowers, who remain eligible to receive Direct Subsidized Loans.
Termination of Direct Loan repayment incentives
With one exception as noted below, the Budget Control Act terminates the authority of the Department of Education to offer any repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans, including any reduction in the interest rate or origination fee, effective for loans first disbursed on or after July 1, 2012. As a result of this change, the up-front interest rebate that has been provided to Direct Loan borrowers at the time of their loan disbursement will no longer be offered on any Direct Loan Program loan with a first disbursement date that is on or after July 1, 2012 (this includes the Direct PLUS / Grad PLUS Program).
The law continues to authorize the Department to offer interest rate reductions to Direct Loan borrowers who agree to have payments automatically electronically debited from a bank account.
No changes have been made to the variety of repayment plans and options open to borrowers.