Changes in 2012 Financial Aid Rules

As years and political administrations pass, the rules and regulations governing student financial aid always shift and change. The core usually stays the same, with minor details being altered from time to time. This is a recap of the last batch of financial aid regulation changes, that went into effect earlier in 2012.

Federal rules on financial aid have changed, photo courtesy MCS@flckr

If you enroll in higher education for the first time on or after July 1, 2012, in order to be eligible for federal student aid, you must have either a high school diploma or a recognized equivalent (such as a General Educational Development certificate (GED) or a homeschool education).

You no longer have the option of becoming eligible for federal student aid by passing an approved test or completing at least six credit hours or 225 clock hours of postsecondary education. For more information, see the basic eligibility requirements for federal student aid.

The EFC or Expected Family Contribution has been changed. The lower a student’s Expected Family Contribution, the higher the student’s federal student aid eligibility.

When you complete the Free Application for Federal Student Aid (FAFSASM), you receive an EFC, which is a number used to determine your federal student aid eligibility. For the 2012–13 school year, you automatically qualify for an EFC of zero if your family income does not exceed $23,000.

Direct Subsidized Loans are not eligible for an interest subsidy during the six-month grace period.

Subsidized loans are loans for which the borrower is not responsible for the interest while the student is enrolled in college on at least a half-time basis, when the loan is in the six-month grace period after the student is no longer enrolled at least half-time, or if the loan is in a deferment status. This provision eliminates the interest subsidy provided during the six-month grace period for subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014. If you receive a subsidized loan during this timeframe, you are responsible for the interest that accrues while your loan is in the grace period. You do not have to make payments during the grace period (unless you choose to), but the interest will be capitalized (added to the principal amount of your loan) when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is in school or during eligible periods of deferment.

Subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2013, have a 3.4% fixed interest rate.

Graduate and professional students are no longer eligible to receive subsidized loans.

Effective for loans made for payment periods that begin on or after July 1, 2012, graduate and professional students are no longer eligible to receive subsidized loans. However, if you are a graduate or professional student, you may still qualify for up to $20,500 in unsubsidized loans each year.

The U.S. Department of Education can no longer offer borrowers repayment incentives.

Effective for loans first disbursed on or after July 1, 2012, the U.S. Department of Education is prohibited from offering any repayment incentives to Direct Loan borrowers, except interest rate reductions to borrowers who agree to have payments automatically electronically debited from their bank account.

All information courtesy

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