Understanding the New Student Loan Laws

Student loans are the gateway to a higher education for hundreds of thousands of Americans each year. This government-backed program allows anyone who has a need to attend school and to get an education so that they may make the most out of their careers and life. Since it is a government regulated program there are ever-changing laws and rules that take affect almost each year. By being an informed consumer you can better understand the laws behind student loans and realize how they affect you, your education and your future.

There are two types of student loans that are governed by the U.S. Department of Education: subsidized and unsubsidized. Almost all students are eligible to receive them regardless of their credit situation or income. These types of loans are guaranteed by the government and come with a 6-month grace period after graduation before payment must begin. In 2006 the annual limit for these types of loans is $2,800 per school year.

For students with financial need below a certain income level subsidized federal student loans let them get the education they desire. Under this type of student loan the federal government covers the interest payments on the loans while the student is in school. Therefore if you borrow $8,000 during your education you will owe $8,000 when you graduate.

Unsubsidized student loans are the exact opposite - they do accrue interest while you are in school and both the loan amount plus any interest are due upon graduation. Students do have the option of paying the interest on the student loans while they are in college if they desire.

The federal government regularly publishes guidelines for student loan debt and disbursement. They define what the rules are for "too much debt" and the guidelines for eligibility into the student loan program. They also, from time to time, either reduce or increase the amount of student loans they will guarantee. For this reason it is important that for any student that they get their application for financial aide in as early as possible for each new school year.

There are many laws in place to make sure that students repay the debt they have accrued while in school. Student loans may not be written off in bankruptcy and are collectable by garnishment and IRS levy. However, there are many programs out there to help students pay back their loans in an affordable fashion after graduation.

At various times the federal government and state governments will offer programs for student loan forgiveness. These are often used as incentives to get students to go into a particular field or practice in a certain region of the country where qualified individuals in a field may be in short supply. Such examples include teaching and nursing. Once students work in a field for a certain number of years the student loans are forgiven by the government and the balance is set to zero.

Student loan laws change ever year, and your best source of information is your financial aide advisor at your school or by contacting your student loan lender directly. They can provide information on how changes affect you and your loan situation.