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college
College loan terms better

That was not the end of the beneficence bestowed upon the populace by Congress and the president. Lenders had begun bailing out of the private student loan business due to the spreading credit crisis. To mitigate the student loan credit crunch, in May lawmakers passed the Ensuring Continued Access to Student Loans Act of 2008.

This law increased the Stafford loan limit to $31,000 total, increasing the amount that students can borrow each year by $2,000.

"Before the law went into effect it was $3,500 for a freshman, $4,500 for a sophomore and $5,500 for junior and senior year," says Carpenter. "Now, freshmen can get $5,500, $6,500 for sophomores and $7,500 for juniors and seniors."

"But the $2,000 increase is always an unsubsidized Stafford loan," says Carpenter.

Even if the student has a subsidized Stafford loan, the portion above the former limits will be counted as unsubsidized.

Assistance for parents

Congress also offered a lifeline to parents.

Previously, PLUS loan repayments would begin 60 days after the final disbursement went to the school. But with the Ensuring Continued Access to Student Loans Act of 2008, parents have two new payment options.

  • Parents can:
  • Elect to pay only the interest on the loan, due quarterly, while the student is in school.
  • Defer the payments on the principal and interest until the student is out of school.

"The changes were made because so many people were having problems paying their mortgages and meeting monthly obligations," says Carpenter.

The law also makes it easier for parents with challenged credit to get PLUS loans.

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Formerly, if you were past due on any loan more than 60 days, you wouldn't qualify for a PLUS loan, says Carpenter.

The following delinquencies will not count against parents who apply for PLUS loans for years 2007 through 2009.

  • Lenders will turn a blind eye to:
  • Loans overdue on a primary residence by less than 180 days.
  • Loans overdue on medical bills less than 80 days.
  • Any other bills that are past due less than 90 days.

The IRS helps, too

Tax credits won't directly impact the cost of tuition and the pain of writing out gigantic checks every semester, but they will help families keep more money in their pockets and less in government coffers. These tax credits have been in place for several years.
  • Two tax credits:
  • Hope credit.
  • Lifetime Learning credit.

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