SEMO financial services director explains new federal student loan changes

FOX23 News at 9 p.m

CAPE GIRARDEAU, Mo. (KBSI) — New federal changes to student financial aid are reshaping how some students and families will pay for college, prompting questions at financial aid offices as borrowers prepare for the upcoming school year.

The changes, which took effect July 1, apply nationwide to colleges and universities that participate in federal Title IV financial aid programs.

According to Southeast Missouri State University’s Office of Student Financial Services, one of the biggest changes is the elimination of Graduate PLUS loans for new borrowers. Those loans previously allowed graduate students to borrow additional federal funds beyond Direct Unsubsidized Loans to help cover the cost of attendance.

The law also places new borrowing limits on Parent PLUS loans, which financial aid officials say could affect families who rely on those loans to help pay for a student’s education.

“We’re going to see some families have some trouble and some issues, and we’re going to try and work with them as best we can to figure those things out,” Executive Director of Student Financial Services Matthew Kearney said.

Kearney said the changes are federal, not specific to Missouri, meaning colleges across the country are working through the new rules.

“This is a national change for what we call Title IV aid,” Kearney said. “That’s Pell Grants, loans, all that kind of stuff. This is the change across the country.”

While schools may experience different impacts depending on their programs and costs, Kearney said SEMO has already received questions from students and families trying to understand what the changes mean for them.

He said graduate students, families using Parent PLUS loans and students enrolled in higher-cost professional programs could be among those most affected.

Kearney also cautioned against assuming the changes will make college less expensive.

“I don’t think you’re going to see significant decreases because of these changes,” he said, noting that some families may instead have to consider private loans or other financing options.

He encourages students and parents with questions about borrowing, repayment or financial aid eligibility to contact their school’s financial aid office or loan servicer before making decisions.

“We’re more than happy to help where we can and try to make sure that going to college is an option for everybody,” Kearney said.

Those seeking more information about SEMO’s financial aid services can visit: semo.edu/sfs

What exactly changed under the new federal student loan law?

The federal law that took effect July 1 includes several significant changes to student loans, repayment options and financial aid programs.

Repayment plans

The Biden administration’s Saving on a Valuable Education (SAVE) repayment plan is no longer available for new borrowers. Current SAVE borrowers have a 90-day window to select a new repayment plan before they are automatically moved into the Tiered Standard Repayment Plan, which could result in higher monthly payments for some borrowers.

The law also creates a new income-driven Repayment Assistance Plan (RAP). Monthly payments will generally range from 1% to 10% of a borrower’s income, with remaining balances eligible for forgiveness after 30 years of qualifying payments. The plan also includes interest subsidies and incentives that help reduce loan principal over time.

Other income-driven repayment plans, including Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR), are being phased out for new borrowers. Existing borrowers already enrolled in those plans may remain in them until July 1, 2028.

The law places new limits on how much students and parents can borrow through federal loan programs.

Parent PLUS Loans

• Maximum of $20,000 per year per student.
• Lifetime borrowing limit of $65,000 per student.

Graduate students

• May borrow up to $20,500 per year through Direct Unsubsidized Loans.
• Lifetime federal borrowing limit of $100,000.

Professional students (such as law and medical students)

• May borrow up to $50,000 per year.
• Lifetime borrowing limit of $200,000.

In addition, a new overall lifetime federal student loan limit of $257,500 applies across undergraduate and graduate borrowing.

Graduate PLUS loans, which previously allowed graduate and professional students to borrow up to the full cost of attendance, are no longer available for new borrowers.

Public Service Loan Forgiveness

The law changes eligibility for the Public Service Loan Forgiveness (PSLF) program by allowing the U.S. Secretary of Education to determine that certain employers are ineligible if they engage in activities considered to have a “substantial illegal purpose.” Those borrowers may no longer qualify for loan forgiveness through PSLF.

Pell Grant changes

The law updates Pell Grant eligibility by closing some eligibility loopholes while expanding access to federal aid for certain short-term workforce training and credential programs.

What borrowers should do now?

Financial aid officials recommend borrowers:

• Log in to StudentAid.gov to review their federal loans and repayment plan.
• SAVE Plan borrowers should choose a new repayment option during the transition period to avoid automatic enrollment in the Tiered Standard Repayment Plan.
• Graduate and professional students should review the new borrowing limits before accepting financial aid.
• Parents using Parent PLUS loans should understand the new annual and lifetime borrowing caps.
• Contact their college’s financial aid office or loan servicer with questions about how the changes affect their individual situation.