January 17, 2006

The latest session of the Senate approved the Budget Reconciliation Act of 2005, S. Bill 1932. The House is expected to approve the bill later this month.

All of this fancy political jargon spells bad news for students who are in need of financial aid.

In a nutshell this legislation would cut over $41 billion dollars of federal financial aid over the next five years. If you are currently seeking financial aid you must know that the timing couldn't be worse. College tuition is the highest it has ever been in history and is expected to rise.

The following points are the key pieces of the legislation that effect financial aid begining July 2006:

Stafford Loans will be increased from a 4.7% to to a 6.8% fixed rate

PLUS (Parent Loans for Undergraduate Students) will be increased from a 6.1% to a 8.5% fixed rate

Low income students that qualify for Pell Grants may qualify for newly created Smart Grants intended for students who major in math, science and certain foreign languages deemed "important" for national security

Extends PLUS loans to graduate and professional students

Increases limits on federal loans to aproximately $3,500 for first and second year students and $4,500 for juniors and seniors

Created a provision for deferral for those students who are on active military duty

Increases student loan origination fees

If you already receive financial aid or have received financial aid do more research on what this means or could mean for consolidation of your loans.