RESTON, Va., June 30, 2008—As a record number of students heads to college this fall, Sallie Mae, the nation’s leading saving- and paying-for-college company, advises families of several important changes in financial aid and student loans that may help them save money.

Students taking out federal student loans this school year can access higher loan limits, will pay lower origination fees, and may qualify for reduced interest rates. In addition, parents may have an easier time qualifying for federal loans and may opt to postpone payments on their loans until after their student graduates.

Starting July 1, 2008, the following legislative changes go into effect:

• The maximum Pell Grant for the 2008-2009 school year will grow to $4,731, an increase of more than $400 over the previous year’s maximum. Pell Grants, which do not need to be repaid, are awarded by the federal government based on financial need.
• Undergraduate students qualifying for “Subsidized” Stafford loans will pay a lower interest rate for new loans taken during the 2008-2009 school year. Rates fall from 6.8% to 6.0%, fixed for the life of the loan, offering savings for students once they graduate and begin repayment. Subsidized Stafford loans are awarded to students with financial need, and interest is not charged while students are in school.
• Undergraduate students can borrow an additional $2,000 in “Unsubsidized” Stafford loans each year they attend college. For example, a typical freshman will now be able to borrow $5,500 in federal loans, up from $3,500 last year. Unsubsidized Stafford loans are offered regardless of financial need, and students are responsible for all interest that accrues. This change can assist students who might have otherwise turned to more expensive financing. (See chart below for further details.)
• Congress has also authorized the eventual elimination of the federally required origination fee students must pay to the federal government for each Stafford loan. The origination fee will drop again this year from 1.5% to 1.0%. It will be phased out completely by 2010.
• Parents and graduate students facing financial challenges during this uncertain economy may have an easier time qualifying for PLUS loans. Borrowers may be up to 180 days late on payments on their primary mortgage or medical bills and still qualify for these federal loans for graduate students and parents of dependent undergraduates. Previously, no bill could be more than 90 days past due to meet the federal government’s basic credit test.
• Parents may also opt to postpone beginning making payments on new PLUS loans until six months after their son or daughter graduates from college or drops below half-time attendance. In the past, parents were required to begin payments while the student was still in school. If parents choose this new option to postpone payments, they can either make interest payments during the college years, or have the accruing interest added to the principal balance each quarter. Parents who are able to make payments may stick with the standard repayment plan and not delay writing their checks. However, for some families struggling during the downturn in the economy, this new option may provide a temporary break that enables students to access the financing necessary to complete their degrees.
  

“These changes in the law are welcome news for families,” said C.E. Andrews, president, Sallie Mae. “Sallie Mae is proud to help make the dream of attending college an affordable reality for families across the United States. Despite the credit crunch and the tough economy, we expect to help a record number of students attend college this fall by lending federal loans to all students at all schools, just as we have for the last 35 years.”

For more information contact:
Patricia Nash Christel (703) 984-5382
Erica Eriksdotter (703) 984-5628