Banks no longer allowed to offer federal student loans
09/20/2010
By Credit.com Staff
College-bound students seeking federal student aid will not longer be able to secure this type of funding through banks and lending institutions. Loans disbursed as of July 1, 2010 will only be provided by the federal government, a move that is expected to make college more affordable for families, according to consumer publication the Plain Dealer. The new legislation aims to provide more federal Pell grants to students and reduce the interest rate for parent PLUS loans from 8.5 to 7.9 percent.
Under the reforms, students may also see a greater variety of repayment plans that will make their payments more affordable and reduce the risk of defaulting on their loans.
Recent reports show default rates across all student loan sectors - public, private and for-profit colleges - have increased over the last year, negatively impacting many Americans' credit scores. A separate report also reveals student loan debt has surpassed credit cards as the highest amount of debt young adults carry.
