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New Law Could Affect How You Pay for College

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Last December, federal lawmakers began to debate the PROSPER Act, a bill that would overhaul the federal financial aid system and cut Obama-era red tape targeting for-profit colleges. According to the bill’s sponsor, the republican Chairwoman of the Committee on Education and the Workforce, Virginia Foxx, “we cannot allow the status quo to continue.”

Among other things, the PROSPER act aims to make it easier for people to engage in a lifetime of learning by making more federal financial aid available to students enrolling in technical or vocational programs, and allowing students who work for private employers to qualify for work-study. But the bill might expose more students to useless education programs or even fraudulent schemes, because it would repeal the requirement that for-profit colleges demonstrate that their graduating students actually get hired in their field of study.

If you’re facing issues with paying for your education and need help managing your debt, call an Ohio debt attorney at Luftman, Heck & Associates at (888) 726-3181 for a free, initial consultation of your case.

How Might the PROSPER Act Change the Way I Pay for College?

The new law proposes a series of reforms that could change the way college students apply for and receive financial aid:

  • Simplifying the FAFSA- The new law will make it possible to fill out the Free Application for Federal Student Aid (FAFSA) in a mobile app. Low and medium-income families may also fill out a simplified FAFSA form, which should make it easier for most students to apply and qualify for financial aid.
  • Overhauling loans, grants, and work-study- The PROSPER act will simplify the current federal student aid system, replacing current offerings with just one type of grant, loan, and work-study program. Subsidized loans, which begin accruing interest only upon graduation, will no longer be offered. This means that all students would get charged interest as soon as they take out a loan. However, the PROSPER act would abolish origination fees, which can reach up to four percent of the loan amount.
  • Placing new caps on borrowing- Undergraduate students will be able to borrow $33,000 per year instead of the current $31,000 in the form of federal loans. Parents will only be able to borrow $12,500 per year on behalf of each child they put through college. Graduate students will be limited to $28,500 in loans per year.
  • Boosting Pell grants- Low-income students may currently qualify for up to $5,920 in grant aid, which they don’t have to pay back. Under the PROSPER act, that amount would increase to $6,220 for students who take 15 credits per semester for one year.
  • Reforming repayment plans- The PROSPER act seeks to reduce the number of loan repayment plans from the current eight down to just two: one 10-year repayment plan and one income-based repayment (IBR) plan. The new IBR plan would push back the date of loan forgiveness, but students would only pay 10 years’ worth of interest on their loan. Under the proposed changes, there would no longer be a public service loan forgiveness program.

These changes are unlikely to affect current students in the immediate future. The PROSPER act will reach the House floor for a possible vote sometime this year. If a majority of the House of Representatives votes for the bill and the Senate approves it, only then may the President sign it into law.

Ohio Debt Attorneys that Understand Your Challenges

At Luftman, Heck & Associates, we know how difficult it can be to build your future when student loan debt is holding you back. From enrolling into an income-based repayment plan to refinancing your loans at a lower interest rate, there may be several solutions to your student debt issues. In cases where there is evidence of dishonesty on the part of your loan servicer, legal action may be on the table.

If you are facing student debt problems, contact us today at (888) 726-3181 for a free consultation.