In recent weeks, the most common question we’ve received regarding paying for college is about changes to the Federal Student Loan program. Here we recap the changes as they pertain to college students. As we mentioned before, private student loans will still be available through private lenders.

See below for details on this historic piece of legislation and its impact on students.

Aware of How Changes in Student Loan Policy Affect You?

Currently, two-thirds of college students take out student loans and the average debt at graduation is $23,000. Signed by the Senate in March, this new law is meant to help US students better afford college and be prepared for the modern world without the burden of excessive debt. So how will this affect you?

• As of July 1, you will apply for all federal loans directly through your college. All lending from the bank-based Federal Family Education Loan Program (FFELP) will be transferred to the Direct Loan Program. Private banks will no longer lend government-backed loans to students.
• Pell Grant funding will be increased. The government will use $61 billion in savings over 10 years to help boost the Pell Grant Program and other education priorities. The Pell Grant currently helps scores of students afford and attend college.
• Student loan borrowers’ payments will be capped at 10% of their income. This means that the burden of debt on recent graduates will be lower as $1.5 billion will go to income-based repayment programs for those with low income as of 2014.
• Increased aid would be directed to historically black, Hispanic, and tribal colleges. These schools will receive an additional $2.55 billion over the next 10 years.