HESC Colleague NewsletterSummer 2008  

Top Five FFEL Program Changes Effective July 1, 2008

Steve Bomeisl

Two regulatory packages (published in the Federal Register on November 1, 2007) are set to become effective on July 1, 2008. Listed below is a brief summary of the top five of these legislative and regulatory changes:

  • Origination Fees: The origination fees for Stafford loans only (not PLUS) will be reduced from 1.5% to 1.0% for all loans with a first disbursement made on July 1, 2008 through June 30, 2009.
  • Decreased Interest Rates for Subsidized Loans to Undergraduate Students: For subsidized loans disbursed to undergraduate students between July 1, 2008 and June 30, 2009, interest rates will decrease from 6.8% to 6%.
  • Late Disbursement "Appeals" Eliminated: Effective July 1, 2008, the Department of Education will no longer make any exceptions for late disbursements. Although ED has agreed to extend the late disbursement time frame from 120 to 180 days, they will no longer review "appeals" for late disbursements (even if the late disbursement was not the fault of the student).
  • Preferred Lender Lists: Although schools are under no obligation to provide a preferred lender list, many schools in New York State have already adopted procedures regarding their preferred lender lists. Effective July 1, 2008, federal regulations will require all schools that use a preferred lender list to include at least three lenders on their preferred lender list and also provide specific disclosures about the loan products offered by these lenders.
  • Prohibited Inducements: These regulations clarify what lenders can and cannot offer to a school in order to secure loan applications. A more definitive list of these Dos and Don’ts will be included in a summary that will be posted on HESC.org in June.