Federal Financial Aid Changes for 2012 / 2013
July brings the summer heat, fireworks and outdoor picnics. Along with all the fun, July also marks the start of a new financial aid award year. An award year always starts July 1 and runs through June 30 of the following year and this award year. For 2012/2013, many changes to the student aid program are coming. Knowing these changes may save you some time in the financial aid office next fall so here is an overall look at what you should expect.
If your FAFSA is selected for verification; a process where the school must verify the information you submitted on your FAFSA, you no longer can submit a copy of your signed 1040s for the tax information portion of verification. Instead you must either use the IRS data retrieval tool via the FAFSA or submit IRS tax transcripts. If you opt to try and use the IRS data retrieval tool you must have a PIN in order to complete the process. If you decide to submit your tax transcripts you must either call or use the IRS website. Understand that this process may take a few weeks. If you want more info and tips on how to make this process a bit smoother, check out our FAFSA Verification article here.
Eligibility For Aid and a High School Diploma
If you are enrolling in college for the first time, in order to be eligible for student aid you must either have a high school diploma, a GED, or have been home schooled. Previously, a student without a high school diploma could take an ability-to-benefit test or complete 6 credit hours of post-secondary education to become eligible for aid. They also had to meet the enrollment requirements for the college that they were planning to attend. Since most colleges required that their incoming freshmen had a high school diploma, GED or were home schooled; you can see why this rule was very obscure. Now the Department of Education has made it very clear that all first time students must have a diploma or equivalent in order to get financial aid, period.
Length of Pell Grant Eligibility
Starting with the 2012/2013 award year, if you have already received 12 full-time semesters of Pell grant funding you will no longer be eligible for any more Pell grant awards. Basically, if you are just starting college this year and are eligible for Pell, you have nothing to worry about. But, if you have been going to college for a while and you receive Pell, you may want to stop by your college’s financial aid office to see how many more semesters you have left of eligibility. This is especially true if you changed schools or majors as you probably will be in school longer than the average 4 years.
Direct Subsidized Loan Changes
You may be familiar with this one already since it has been in the news since the changes were first introduced last year. There has been so much discussion in Washington on this that even the original changes have changed! Below are the most recent facts when it comes to the subsidized loans.
- Interest Rate – This held the biggest contention when it was first announced that the interest rate for the Direct Sub loan was going to jump to 6.8% for any new loans made for the 2012/2013 award year. Recently, this has now been dropped to 3.4% but only for loans for the 2012/2013 award year. That means that we might be having this same discussion about subsidized interest rates this time next year…
- Interest and the 6 month grace period – Previously, during you 6 month grace period prior to repayment, the Direct Subsidized loan did not have interest accrue during that time. Interest would not start accruing until you entered repayment. Now, any loans disbursed between July 1, 2012 and July 1, 2014 will no longer have that perk. That means that during the 6 month grace period you will now have interest accrue on those loans. Interest will still not accrue while you enrolled at least ½ time and you still are not required to make payments during that 6 month grace period.
- Graduate and Professional student no longer eligible – Starting July 1, 2012 graduate and professional students will no longer be eligible to receive the subsidized portion of Federal student loans. You still are eligible for Direct Student Loans, but they will consist entirely of the unsubsidized student loans. Remember, the Unsub has a higher interest rate and interest is accruing even while you are in school.
There you have it, the changes that are most important to you summed up in one place. Make sure you stop by your school’s financial aid office for more info as they will be able to tell you what is most important to you and your college education.