Legislation Gives AZ Students a Break on New Stafford Loans

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Mesa Attorney Lawrence ‘D’ Pew discusses impact “Moving Ahead for Progress in the 21st Century” legislation will have on Arizona student loan borrowers.

The new 150% rule pressures students to graduate without unnecessary delay. If they cannot, then they’ll pay on loans while still enrolled...

Earlier this month, President Obama signed H.R. 4348 into law. Centered mainly on extending transportation projects, this legislation is the “Moving Ahead for Progress in the 21st Century Act” (MAP-21). Significant for Arizona, MAP-21 also extended certain direct student loan programs that were set to expire at the end of June.

“Important changes to the direct Stafford Loan program went into effect on July 1st,” began Lawrence ‘D’ Pew, managing attorney at Pew Law Center, PLLC, in Mesa. The cost of a college or university education for many 2012 Arizona students just went up. “Parents and student borrowers need to know precisely how those changes will affect their pocketbooks,” continued Mr. Pew.

The Direct Stafford Loan program still offers both unsubsidized and subsidized loans to Arizona undergrads. Unsubsidized undergraduate loans increased to a fixed rate of 6.8%. For subsidized undergraduate loans, MAP-21 extended the 3.4% interest rate for one more year, after which the rate will also double.

Unsubsidized Stafford loans to graduate and professional degree students are now fixed at 6.8% interest. Subsidized loans for this group of borrowers has been eliminated. These loans begin charging interest upon disbursement with interest accrued and added to the principal debt. Attorney Pew noted that “this increases the total cost for graduate loans to doctors, lawyers, and other professionals, which means consumers will probably start paying more for professional services in the near future.”

Loan periods are now limited to 150% of the program’s length. For students enrolled in four-year degree programs, the limit is six years or 150% of the full-time completion schedule. “The new 150% rule pressures students to graduate without unnecessary delay. If they cannot, then they’ll pay on loans while still enrolled or may quit school to work,” commented Mr. Pew.

The six-month grace period has been eliminated for all Stafford loans made on or after July 1, 2012. The borrower must begin repaying the loan immediately upon graduation. “Previously,” says Mr. Pew, “graduate and undergraduate borrowers enjoyed a six-month grace period.” The grace period provided some breathing room to transition from school to employment before starting loan repayments. With new direct loans, as soon as the student finishes school he or she must immediately start making payments.

“I’ve addressed many loan defaults over the past several years in my bankruptcy and tax debt relief law practice,” remarked Mr. Pew. “These changes to our student loan program may increase the frequency of early defaults, particularly for graduates who cannot find work right away in this economy.”

To learn about student loans in Arizona bankruptcy, call the Pew Law Center at 480-745-1770 visit the firm’s website at http://www.PewLaw.com.

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Lawrence 'D' Pew is an experienced tax, bankruptcy, and transactional attorney, and founder and managing attorney of the Pew Law Center, PLLC, a leading Arizona tax and bankruptcy law firm focused exclusively on debt relief. With offices in Mesa, the law firm serves Arizona residents in the greater Phoenix area, including Scottsdale, Mesa, Tempe, Gilbert, and Chandler. A client-oriented law firm with a mission to always exceed client expectations, the Pew Law Center has helped over 2,000 people file for bankruptcy and eliminate over $100 million in debt.

Visit the Pew Law Center, PLLC, at http://www.PewLaw.com.

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