Students and Parents: July 1 Brings Increases in Funding for College

June 30, 2008 11:19 AM EDT

RESTON, Va.--(BUSINESS WIRE)--

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."

New Undergraduate Stafford Student Loan Limits, Effective July 1, 2008

    Dependent Students:

    --  Freshman: $5,500/yr with subsidized portion no more than
        $3,500

    --  Sophomore: $6,500/yr with subsidized portion no more than
        $4,500

    --  Junior/Senior: $7,500/yr with subsidized portion no more than
        $5,500

    Independent Students:

    --  Freshman: $9,500/yr with subsidized portion no more than
        $3,500

    --  Sophomore: $10,500/yr with subsidized portion no more than
        $4,500

    --  Junior/Senior: $12,500/yr with subsidized portion no more than
        $5,500

    Undergraduate Lifetime Limit:

    --  Dependent: $31,000 with no more than $23,000 subsidized

    --  Independent $57,500 with no more than $23,000 subsidized

Note: Subsidized loans are awarded to students who have demonstrated financial need. While the student is in school, in grace or in deferment, interest is not charged. Unsubsidized loans are awarded to students regardless of financial need. The student is responsible for the interest, but does not have to make payments while in school. Any unpaid interest that accrued during the in-school period and the six-month grace period is added to the loan principal, or capitalized, at the time repayment begins.

SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation's leading provider of saving- and paying-for-college programs. The company manages more than $169 billion in education loans and serves 10 million student and parent customers. Through its Upromise affiliates, the company also manages nearly $19 billion in 529 college-savings plans, and is a major, private source of college funding contributions in America with more than 8.5 million members and $425 million in member rewards. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors and state and federal agencies. More information is available at www.salliemae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

Source: Sallie Mae

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