Student loan reform to take effect July 1

Student loan reform written into the new health care law will take effect July 1.

Private banks will no longer handle federally backed student loans, and the government will lend directly to students. The changes will not directly impact loans issued by West Virginia University.

Previously, students could obtain low interest federally backed loans from private intermediaries such as banks and credit unions through the Federal Family Education Loan Program. Approximately 3,000 schools used the program to administer loans to their students, said Steve Riffon, client services manager at WVU's Office of Financial Aid.

Another 2,000 schools, including WVU, already use the Federal Direct Student Loan Program, which uses money coming directly from the federal government.

Riffon said the new law will end FFELP in favor of the FDSLP.

"All schools will transfer over to direct lending schools," he said.

The Congressional Budget Office expects the reform to save $62 billion from fees assessed by intermediaries over the next decade. In total, $36 billion of the savings will go to the Federal Pell Grant program to provide funding to low-income college students.

To qualify for Federal Pell grants, students must submit a Free Application for Federal Student Aid.

The FAFSA indicates a student's expected family contribution, and if their expected contribution is low enough, a student may be eligible to obtain a Pell grant. Under the new law this limit will be raised to include more students, Riffon said.

Sallie Mae, one of the largest issuers of private, federally backed student loans is expected to lose revenue and cut employees due to the new policies but will still offer other financing aids and options for college students.

"Sallie Mae will continue to offer savings programs, interest-free tuition payment plans and private loans," said Patricia Nash Christel, with Sallie Mae's Corporate Communications.

Christel also said there would be no change to loans issued prior to July 1.