FEDERAL STUDENT LOAN POLICY

Outline for Federal Student Loan Policy Paper

I.

Abstract
A) The federal student loan policies in the United States are a long debated about
topic. This subject has various aspects to consider when analyzing the current
policies.

II.

History of the student loan policy

A) Federal Student Loan Program began in the Department of Education as a small
program.
B) In 1978 Congress began the withdrawal of bankruptcy for student loans unless an
undue hardship was proven. The United States gave Congress the power to
delegate bankruptcy laws.
a. Bankruptcy Act of 1898, followed by reforms of this code in 1978, 1990,
1998, & 2005.
C) Congress decided to put America in school in 1958 when the Soviet Union
launched Sputnick.
a. 1958 National Defense Education Act, which established the Perkins Loan
as a precursor.
b. 1965 Stafford Loans were created
D) Consistent increasing tuition rates
E) Constant increasing student debt

III.

Description of the current problem and problems that necessitate the problem
A) Student loan debt
a. Federal Government deficit

FEDERAL STUDENT LOAN POLICY

b. Students with education debt are unable to pay because of lack of

employment.
c. Parents and Grandparents are in debt to student loans regarding their
children/grandchildren.
B) Limits placed on subsidized and unsubsidized loans to prevent students from
qualifying for additional aid if they need it.
a. Policies in place to address this concern include:
i. Federal Interest Rate Reduction Act & the Transportation
Reauthorization Bill
ii. Dodd-Frank Act
iii. Possible reform of the Bankruptcy Code
iv. Cohort Default Rates
v. Fair Lending Act & Equal Credit Opportunity Act
vi. Pell Grants and Scholarships
IV.

Policy Description
A) No more than 12 semesters of Federal Pell Grants for students
B) Congress Passed Bipartisan Student Loan Certainty 2013
C) Annual Aggregate Limits for Loans
a. First year undergraduate
i. Dependent students - $5,500, no more than $3,500 is in subsidized
loans.

FEDERAL STUDENT LOAN POLICY

ii. Independent students (or dependent students whose parents could

not obtain a PLUS Loan) - $9,500, no more than $3,500 in
subsidized
b. Second year undergraduate
i. Dependent students - $6500, no more than $4500 in subsidized
loans.
ii. Independent students (or dependent students whose parents could
not obtain a PLUS Loan) - $10,500, no more than $4,500 I
subsidized loans.
c. Third year and beyond undergraduate annual loan limit
i. Dependent students - $7,500, no more than $5,500 in subsidized
loans.
ii. Independent students (or dependent students whose parents could
not obtain a PLUS Loan) - $12,500, no more than $5,500 in
subsidized loans.
d. Graduate and professional
e. $20,500 unsubsidized only
f. Subsidized and Unsubsidized Aggregate Loan Limit
i. Dependent students - $31,500, no more than $23,000 in subsidized
loans.
ii. Independent students (or dependent students whose parents could
not obtain a PLUS Loan) - $57,500 for undergraduates, no more
than $23,000 in subsidized loans

FEDERAL STUDENT LOAN POLICY

iii. $138,500 for graduate or professional students, no more than

$65,000 in subsidized loans. The graduate federal limit includes
all loans received in undergraduate studies.
D) Interest Rates on Federal Student Loans
a. Direct subsidized loans undergraduate 4.29%
b. Direct unsubsidized loans undergraduate 4.29%
c. Direct unsubsidized loans graduate or professional 5.84%
V.

Dictation of the Federal Student Loan Policy

A) Federal Governments
B) State sponsored grants

VI.

Policy Analysis
A) What works and what does not work:
a. Placing limits on financial aid works to decrease the amount of student
loan debt but also makes funds less obtainable for low income students
and those who need excess funds for spring/summer semesters.
b. Those who do not graduate will be faced with student loan debt and no
degree to obtain a better paying job.
c. With tuition rising and the loan amounts not increasing eventually low
income populations will not be able to afford the costs.
d. Students from disadvantaged backgrounds have a higher rate of
enrolling in two-yea concentration programs.
e. One in five students from the lowest socioeconomic class enrolled in a
four year institution.

FEDERAL STUDENT LOAN POLICY

B) Length of current policy Since July 2013
C) Repayment programs for loans Poorly targeted and very complex
VII.

Conclusion
A) Supporters and those against the current policy
B) Advocates opinion of current policy
C) Policy Goals
a. Decrease student debt
b. To ensure that a college education is available for all populations.