|College financing in 2006: A year of change
Competitiveness Grants are worth
$750 and $1,300 to first- and
second-year students who have
coursework in high school. With
the ink barely dry on the legislation,
grants were just awarded for
the first time ever in fall
2006. Grants, of course, do
not have to be repaid.
The SMART Grant (short for "National Science and Mathematics Access to Retain Talent") is worth up to $4,000 a year for third- and fourth-year undergrads majoring in math, science, engineering and certain foreign languages.
Meanwhile, a number of recent changes on the financial-aid front immediately affected those paying off their halcyon days at university.
For the first time ever, students taking out a federal Stafford loan will pay a fixed 6.8 percent for the life of the loan. Only Congress can amend the rate. That's a radical shift. Previously, Stafford loans were variable, meaning rates were reset every year. The fixed rate applies to Staffords issued as of July 1, 2006.
Those with the older model Staffords pay variable rates, unless, of course, they consolidate, locking in a loan at a steady rate.
And in fact,
that's just what borrowers did
earlier this year -- to the
tune of nearly $40 billion worth
of consolidation. Looming increases
drove the stampede to lock in
deals at low rates, typically
just over 5 percent, before
the July 1 deadline.
The federal Plus loan was changed, too. The most unwelcome, no doubt, was its rate increase from 6.1 percent to 8.5 percent for Plus loans issued by private lenders. On the other hand, the Plus loan program, which had been limited to parents of college students, was expanded so that graduate students can borrow, too.
notes Brett Lief, president
of National Council of Higher
Education Loan Programs. "It's
opening a whole new program
to graduate and professional
students who previously had
to borrow at commercial rates
and providing them with a federally
based loan that's more affordable."
Overhauling 529 plans
Even if your budding Einstein is years away from dorm life, 2006 brought changes that affect you, too.
true for those contributing
to a 529 college savings plan.
These investments, first introduced
in 1996, are sponsored by individual
states although you don't have
to be a resident to participate
in a particular plan. Each 529
plan varies in terms of investment
offerings, but earnings in all
may be taken out free of federal
taxes as long as they are used
for bona fide higher education
And now these federal tax breaks are carved in stone. Until Congress acted this year, they were set to expire in 2010, meaning families who cashed out of 529s at decade's end would have ended up pocketing far less.