By Devyn Lyon, Fox23 News
OKLAHOMA — Changes to federal student loans are set to take effect July 1, just as students and families begin preparing financial aid plans for the upcoming school year.
According to Dr. Shaan Patel, the CEO and founder of Prep Expert, the federal government is reducing how much money it will distribute in student loans.
However, he said that doesn’t mean students are out of options.
“The overall message is the federal government is reducing how much money they’re giving out for student loans, but that does not mean hope is lost to pay for college,” Patel explained.
One of the biggest changes involves repayment options.
Instead of having more than a dozen repayment plans, borrowers will now choose from three or four streamlined options.
“That means that instead of having 12 different options to repay your student loans, it’s coming down to three or four different options. This simplifies the process, but it also limits your options of repayment in the future.”
When families complete the Free Application for Federal Student Aid (FAFSA), repayment timelines will also change.
Previously, some plans stretched repayment out 45 to 50 years. Under the new structure, repayment will be capped at 25 years.
Loan amounts for undergraduate degrees will also be capped.
Patel said the changes come with tradeoffs.
Supporters argue the limits could discourage students from taking on large amounts of debt for degrees that may not lead to high-paying careers.
“Proponents of this would say this helps drives ROI. You’re not going to take a $200,000 or $300,000 student loan out to pursue a degree such as social work, for example, where you may not be able to pay that back over time.”
However, critics argue that capping loans and narrowing repayment flexibility could limit what students feel they can afford to study.
Another potential impact: fewer federal dollars are flowing into student lending.
That could open the door for more private student loans, which often come with higher interest rates and less flexible repayment terms.
Despite concerns, Patel said there may be a silver lining.
Student loan debt nationwide is approaching $2 trillion, which many experts consider a national crisis.
“Reducing student loans overall, in terms of funding college educations, the other really positive impact that could happen out of this is colleges are going to have to lower tuition costs for certain degree programs because students just can’t get the funding for it through the federal government. I really do hope to see college tuition costs come down and education costs overall come down.”
As families prepare to fill out FAFSA forms in the coming months, experts encourage students to explore scholarships, grants and other aid opportunities along with carefully evaluating the long-term cost of any degree program before borrowing.
