Financial Aid

Student Loan Changes

As part of the recently-passed Health and Education Reconciliation Act, Congress made a number of important changes to the Student Loan Program to help save students and families money and reduce wasteful government spending. Here are some frequently-asked questions about the changes:

Q. What changes have been made to the student loan program?

A. Congress recently made several major changes to the federal student loan program. Most importantly, we have ended the wasteful subsidies that taxpayers had been providing to banks. By removing the middlemen, American taxpayers will save more than $60 billion over the next 10 years. With these savings, we are making critical investments in Pell Grants, and community colleges.

Of the $60 billion we saved, approximately $40 billion will be invested in Pell Grants, meaning that over 20,000 more people in Michigan will now qualify for Pell Grants. Additionally, starting in 2013, the Pell Grant will automatically increase with inflation, raising the maximum Pell Grant award to $5,975.

In 2014, a new system will come into place to help graduates repay their student loans. New borrowers will be able to cap their loan payments at 10% of their income, and if they pay their bills on time, their remaining debt will be forgiven after 20 years. For students who choose to work in public service-such as police officers, firefighters, EMTs, teachers, social workers, nurses, people with military service public defenders and prosecutors-their student loan debt will be forgiven after 10 years if they make all their payments on time.

Q. How can people apply for Pell Grants?

A. To apply for financial aid, including Pell Grants, you need to fill out the Free Application for Federal Student Aid (FAFSA), which is online at The Department of Education will award the new Pell Grants automatically based on your FAFSA and there is no additional burden on the student to provide more information. Each school has its own deadlines for when your FAFSA information must be submitted, and I recommend contacting the financial aid office of the schools you are interested in to find out their deadlines. Many schools recommend that you have your FAFSA information submitted as soon after January 1 as possible.

Q. I am currently in college and have already taken out student loans. How will this change affect me?

A. If you are already attending a public university in Michigan, you will continue to get Direct Loans as you have in the past. If you are currently attending a private university or community college in Michigan that was not part of the Direct Loan program, you will very likely begin saving money right away because your loans will be guaranteed by the Department of Education and will have a fixed low interest rate. You will no longer have to rely solely on private lending institutions to finance your education. You may also notice some small changes to your yearly financial aid request (such as needing to submit a new promissory note). Generally, students should not notice a major change in terms of forms or other required information.

Q. I am currently enrolled in college and I am not currently eligible for Pell Grants. How will I know if I am eligible next year?

A. As the changes to Pell Grants begin to roll out, more and more people will become eligible. If you are eligible to receive a Pell Grant, you will receive the grant automatically if you fill out the Free Application for Federal Student Aid (FAFSA) online at If you have questions about your eligibility or believe you should receive a Pell Grant, get in touch with your school's financial aid office. They have staff on hand who are experts in the financial aid system and should be able to answer any questions you have. You can also visit the Department of Education's website at: to read more about eligibility requirements for the Pell Grant Program.

Q. How are graduate students affected by the changes to the student loan program?

A. They should not be affected any differently than undergraduate students. After they institute this new program, if you are currently attending a university that offers loans other than Direct Loans, the interest rate on any subsequent Graduate/Professional PLUS loans will be reduced from 8.5% to 7.9%.

Q. Will this limit the amount of other loans I can take out to pay for school, beyond Pell Grants and Direct Loans?

A. Not at all. This legislation does not stop private lenders from providing students with loans. It simply removes them as the middlemen in federal student loans. Private lenders will continue to be able provide loans that will make up the difference required to pay for school.

Q. How will this change help community colleges?

A. Community colleges will receive an additional $2 billion over four years. This is a critical investment to community colleges, which have been overburdened in recent years. This money will allow community colleges to increase the number of students they serve and improve the job training and retraining programs they provide to workers who have lost their jobs.

Q. I recently graduated from college and am working in public service. I'm working to pay down my debt. How will this legislation affect me?

A. Unfortunately, the changes to loan repayments and loan forgiveness will only affect students who take out loans after July 1, 2014.