Change is inevitable, especially when a deteriorated national economy, federal organizations, and higher education are all a part of the picture. Late 2011 brought about what was just the beginning of big changes to the way students apply for, are eligible for, and repay federal financial aid. And, though most of the modifications came as a result of congress passing its 2012 appropriations legislation back in December 2011, one of the 2012 changes took nearly a year to begin impacting students. To keep you in the know, here is a list of the changes to federal financial aid policies that took effect in 2012:
No more year-round Pell grants
It was short-lived but loved very much just the same. Back in April 2011, President Obama signed the FY 2011 spending bill, also known as the Continuing Resolution, which permanently eliminated year-round Pell awards beginning with the 2011-2012 school year. These grants once allowed needy students who wanted to attend summer school classes the opportunity to receive Pell grant funding from their current school year eligibility or their future school year eligibility (if they qualified for it both years by filling out each year’s FAFSA). With that program currently canceled, qualifying Pell-eligible students can only receive grant money over the summer if they have not already used up their current school year’s awarded amount.
Effective immediately and retroactively after Congress passed the 2012 appropriations legislation, students are only eligible for six full-time years of the Pell grant (12 semesters or its equivalent). For a substantial amount of time Pell grant eligibility lasted nine years — or 18 semesters — of schooling. This primarily hurts students who can’t afford to tend to their bachelor’s degree full time.
Tougher eligibility standards
The maximum expected family contribution (EFC) a student can have as a result of filling out their FAFSA and still qualify for any sort of Pell grant has been reduced from $5,273 during the 2011-2012 school year to $4,995 for the 2012-2013 school year. This means that students who qualified for a Pell grant during the 2011-2012 school year may no longer be eligible, even if their family’s financial situation hasn’t improved.
Uncertain fixed interest rates
Despite a proposed increase from 3.4% to 6.8% for the fixed interest rate on subsidized Direct loans, state representatives pressured congress to leave the rate as is at least until 2013. With such drastic shifts in rates, it is important to stay informed about the details of your loans. In addition, interest subsidies on qualifying Direct loans no longer continue through a six month grace period following graduation. Instead, interest begins accruing as soon as a student finishes attending classes. This ultimately makes the loans more expensive to borrow.
Finally, an up-front interest rebate that had been provided to Direct loan borrowers at the time of their loan’s disbursement, a repayment incentive that was awarded to encourage eventual on-time repayment of loans, is no longer being offered on any federal Direct loans, and subsidized Direct loans are no longer available to graduate students.
Complexity in verification process
Verification is the process in which a student’s university audits their FAFSA application by comparing those answers to the student’s (and their parents’ if need be) federal income tax information. The Department of Education made this process a bit more difficult for families to complete by requiring that, for verification, students submit IRS tax transcripts instead of their 1040 tax return to their schools. The transcript request can be difficult to obtain and often can come in past the due date for the verification documents.
An easy way of dealing with this verification process is through the IRS Data Retrieval process for the FAFSA. Those individuals who have filed their taxes and given the IRS a few weeks to process the paperwork can essentially log back into their most recent FAFSA and request that their approved IRS tax information be directly placed on their FAFSA application with the click of a button. Once this is done a family typically does not have to submit tax transcripts to complete the verification process (although other paperwork may be required). If you run into issues make sure to contact your financial aid office as soon as possible.
Keep an eye on your eligibility
If you’re working on completing your higher education degree, it is incredibly important that you keep up-to-date with any changes that will come your way in this arena. If you’re proactive about any funding problems that may arise, your new best friend (your financial aid advisor) can properly assist you.