Upcoming Regulatory Changes

To help school and lender customers prepare for the upcoming regulatory transitions, OGSLP is highlighting items from the Higher Education Reconciliation Act (HERA) and College Cost Reduction and Access Act (CCRAA) that have an effective or trigger date of July 1, 2008.

Origination Fee Reduction
The origination fee for Stafford loans for which the first disbursement is made on or after July 1, 2008 will be 1.0 percent (currently 1.5 percent). The mandatory 3 percent origination fee for PLUS loan borrowers did not change.

Interest Rate Reduction
The fixed interest rate for undergraduate, subsidized Stafford loans for which the first disbursement is made on or after July 1, 2008 through June 30, 2009 will be 6.0 percent. For more information about this reduction, see our Do You Know the Answer feature.

Consolidation Option for Public Service Loan Forgiveness Program
Federal Family Education Loan Program (FFELP) borrowers may consolidate their FFELP loans into a Direct Consolidation loan if the borrower intends to be eligible to use the public service loan forgiveness program. However, payments made on FFELP loans prior to consolidation into the Direct Loan program do not count toward the 120 month requirement for the forgiveness program.

For more information about these provisions, refer to OGSLP’s Impact Summaries for HERA and CCRAA. In next month’s online newsletter, we’ll highlight items from the November, 1, 2007 Loan Provisions Final Rules.