HESC Colleague NewsletterSummer 2010  

How the Elimination of FFEL Affects New York State Students

Elsa Magee

Following is a message from acting HESC President Elsa Magee about the elimination of FFEL and its effect on New York's students and parents. This message has been distributed via HESC.org, the news media, and through colleagues like you ...

    The recent enactment of the Health Care and Education Reconciliation Act (HCERA) creates a change in the way student education loans are handled at colleges throughout the country. Beginning July 1, 2010, the bank-based Federal Family Education Loan (FFEL) Program will sunset and all new federal Stafford, PLUS and consolidation loans will be made directly by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program (FDLP).

    If you are a New York State college student, you may be concerned about what this means.

    Students who have received FFEL Program loans in the past will continue to be eligible for all the loan benefits that were included in that program. If you are applying for a new loan for the fall, you will notice little or no change in the FDLP application process.

    College students looking for loans for the 2010-11 academic year must still complete the Free Application for Federal Student Aid, or FAFSA, to receive a Stafford or Professional/Graduate PLUS loan, and parents must complete a PLUS loan application if they choose to take a loan for their college-going children. Loan funds will continue to be disbursed directly to your college. If you have any questions about your loan application, it is always best to go to your college financial aid administrators who will help you through the process.

    HCERA also makes some favorable changes to federal student loan repayment terms. Beginning July 1, 2014, the percentage of income that any borrower must pay in student loans will be capped at 10 percent of a borrower’s prior year annual income, down from the current 15 percent. In addition, borrowers will be able to qualify for loan forgiveness after 20 years of income based repayments, down from the current 25 years.

    Under the FFEL Program, agencies like the New York State Higher Education Services Corporation provided guaranty services on federal student loans, serving as a central point of contact for students throughout the life of their federal loans. Although the federal student loan program has changed, the Higher Education Services Corporation (HESC) continues to be New York’s student financial aid agency and your source for information and programs to help you prepare and pay for college.

    Elsa Magee
    Acting President
    HESC