July 1st Marks Important Changes for Student Loan Borrowers

by DeLadurantey Law Office, LLC on July 22, 2014

dollar signMany businesses slow down during the month of July, but for those involved with student loans and higher education, July 1st brought about many new changes. Below are a few:

  • Interest rates. A change in the law passed last year has resulted in the interest rates for federal student loans being based on the rate of the 10-year Treasury note. In 2014, that rate was 2.61%, which is an increase of .08 from last year. If your student loan is disbursed after July 1st, it will have a fixed interest rate of 2.61% for the life of the loan.
  • Closed school discharge. The law previously provided that a student enrolled within 90 days of the date a school shuts down and is unable to complete his/her credentials at a different school, was eligible to have associated federal student loans discharged. The new rules have expanded this time period to 120 days from the date the school shuts its doors.
  • Income-based options. New student loan borrowers who take out their first loan after July 1st can qualify for a form of income-based repayment plan, which caps their payments at a maximum of 10% (instead of 15%) of their disposable income. The borrower may also obtain forgiveness of any balance left due after 20 years (instead of 25 years).
  • Defaulted student loans. The three options borrowers have for getting their federal student loans out of default are to pay the loan in full, rehabilitation of the loan and consolidation. The rehabilitation process requires the borrower to make nine consecutive payments on-time and in an amount agreed to by the borrower and the lender. The new rules standardize how the rehabilitation process works for all federal student loan borrowers and it implements the “15% rule.” This means that a borrower’s payments will initially be calculated as 15% of his/her disposable income. If this amount is too high for you, there is a procedure for submitting a financial hardship form that allows you to provide a more complete explanation of your financial situation.

If you have questions regarding how the new rules will impact you or you need assistance with managing your student loan debt, call us today.

If you are considering filing for bankruptcy protection or you need assistance with your student loans, call DeLadurantey Law Office, LLC, at (414) 377-0518. We believe that each client should receive the individual attention necessary to reach their financial goals. Recognizing the needs of working clients, we maintain a flexible schedule and offer evening appointments. Initial consultations are always free, and phone inquiries are always welcomed. Find us on the Internet and on Facebook.


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