Big changes to federal student loans are starting: Here’s what SC borrowers  should  know

Starting July 1, federal student loan programs will undergo significant changes impacting new borrowers and those already repaying their federal loans.

The new regulations were enacted by Congress a year ago allowing time for educational lenders, like the South Carolina Student Loan Corp., to prepare before they go into effect next month.

At SC Student Loan, we believe access to loans should never be a barrier to a student’s pursuit of a degree or the attainment of their dreams.

We are a nonprofit educational lender established by the state of South Carolina more than 50 years ago, and we have used the expertise gained over that time — informed by our mission to serve students and their families, not shareholders — to spend the past year finding creative ways to meet the needs of those impacted by these changes to federal student loans.

A key component of the work we do is to educate and advise borrowers on the best options for them based on their personal circumstances. But before we talk about solutions, let’s review what borrowers need to know about these new federal student loan rules.

For those currently repaying federal student loans, the SAVE (Save on a Valuable Education) program is ending, and borrowers have 90 days to choose a new federal repayment plan or refinance their loans with another lender.

There are two federal options:

• The standard repayment plan sets a fixed repayment amount to be paid off over 10 to 30 years based on the loan balance.
• The repayment assistance plan is a new option that will tie loan payments to income. Payments will vary from 1% to 10% of the borrower’s adjusted gross earnings. They can receive loan forgiveness if they still carry a balance after 30 years of payments.

For those entering college or graduate school, federal loans will have new borrowing limits:

• Parents of undergraduate students can no longer take out loans for their students up to the cost of attendance. New parent-secured federal loans are capped at $20,000 annually with a lifetime limit of $65,000 per student.
• Graduate PLUS loans are being eliminated.  Direct graduate loans, the federal option now available, have a borrowing maximum of $20,000 annually and $100,000 over a lifetime (which excludes any undergraduate loans).
• Students seeking a professional graduate degree, in fields like medicine or law, are capped at $50,000 per year and $200,000 over their lifetime.
• Borrowers who took out federal loans prior to July 1 are exempt from the new lifetime loan limits.

While navigating these changes can be difficult, SC Student Loan offers some innovative lending solutions to help borrowers cover their higher education costs.

For example, to address the limit to medical school loans, we partnered with Edward Via College of Osteopathic Medicine, the second largest medical school in the country with a campus in Spartanburg.

We worked with the college to develop a product that offers interest rates as low as 3%, flexible repayment options, and up to 48 months of deferred payments during residency.

If an incoming medical student needs more than the $50,000 allowed under the new federal law to cover the $92,000 annual cost of attendance at the college, this option can cover the shortfall.

We have other creative partnerships that lessen the burden of repayment.

Some students entering professions like teaching, nursing, finance, and information technology, can take advantage of BOLD (Better Outcomes, Less Debt) Career Pathways that offer loan forgiveness in return for work.

These employer-sponsored programs put borrowers on track to have a job with the sponsor company after college. In return for filling a critical-need position, the employee gets the benefit of their employer paying off a year of their loan for every year that worker stays on the job.

For borrowers who must choose a new repayment plan, study what options are available. Shop around. Check interest rates and terms of repayment offered by various lenders before making a decision.

College financial aid officers are a great resource or reach out to SC Student Loan for counseling services. As a nonprofit, we are here to help borrowers find a solution, even if it is not with us.

Contact our team at (800) 347-2752 or at www.scstudentloan.org.

Taking the time to explore all the options can help save a significant amount over the life of a loan and keep borrowers on track to reach their goals faster.

Ray Jones is chief product officer at South Carolina Student Loan Corp. With over 25 years of experience in higher education finance, Ray is dedicated to helping South Carolina students access affordable loan options.