A federal law that takes effect this week spells more money in the pockets of college undergraduates who borrow from Uncle Sam.

The new law changes the annual Stafford loan limits for students who qualify for financial aid. The change provides an additional $875 per year for freshmen and $1,000 per year for sophomores. The $5,500 loan limits for juniors and seniors remain unchanged but graduate and professional students will see their annual loan limits increase by $2,000.

College officials say the change can be good for students as it may help them avoid more expensive financing to pay for tuition and fees. But the new loan limits come with a catch, according to Ball State University’s Tom Taylor, vice president for enrollment, marketing and communications.

Taylor said the government is not necessarily giving students more aid, but instead reallocating funds a student may need if he or she attends a fifth year of college.

“The government is essentially saying you can borrow more money up front, but you might start to run out on the back end if you’re in school more than four years,” Taylor said.
Changes won’t help all

Parents of incoming Ball State students say the change no doubt will be helpful for families receiving financial aid. “I think it would provide students and their families more options up front,” said Pam Loeffler, whose daughter, Melissa, will attend Ball State this fall.

But the new loan limits won’t help their family, said Loeffler’s husband, Bob.

“We can’t get any aid for Melissa because we don’t qualify for it,” Bob Loeffler said.

Pam Loeffler said the federal government doesn’t do enough to help middle-income families like theirs. “We can’t get any breaks,” she said. “We save and save for our kids to go to school, but then it’s almost like that becomes a disadvantage for us.”

The government does not recognize a specific income limit for a family to qualify for financial aid. Instead, calculations are made based on a formula that examines the number of people in the household and in college; age of the eldest parent; investments; cash and savings and more.

Scott and Deb Thorn, Huntington, attempted to secure financial aid a few years ago for one of their three daughters, now a student at Indiana-Purdue University Fort Wayne (IPFW).

“We couldn’t get anything for her,” Deb Thorn said. But the couple plans to try for financial aid again, this time for their daughter, Brittney, an incoming freshmen at Ball State.

The Thorns planned to attend an orientation session Tuesday on navigating the financial aid process.

Scott Thorn said they hoped for the best. “We’ll just have to take the cost as it comes and hope we can get them [loans].”
No increase to loan limits

Taylor said the changes to the loan limits have been a long time coming. “I certainly think it’s time the government took a serious look at them,” he said.

The limits on the amount of money students can borrow through federal loans have not increased since 1992. Over the same time period, tuition rates have more than doubled.

The average tuition at four-year public colleges and universities is $5,836 for the 2006-07 school year, according to The College Board. Ball State’s tuition for the coming 2007-08 academic year is $6,672.

For undergraduates, the maximum federal loan limits are $23,000 for those whose parents claim them as dependents and $46,000 for those on their own. All graduate and professional students are considered independent.

As part of the legislation that takes effect this month, borrowers also get a break on the cost of origination fees for their loans. Origination fees are fees paid by the borrower to the lender to cover administrative fees for the loan.

The origination fee for Stafford loans dropped from 2 percent to 1.5 percent this month; the government plans to completely phase out the fee by 2010.

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