Rachelle Feldman, associate director in UC Berkeley’s Financial Aid Office, talks about changes in the federal college loan program, announced this week, and what they mean for Berkeley students and graduates.
Q: What is the new loan program announced by the Obama administration, and who qualifies for it?
A: The new program is designed to help students already repaying their Federal Direct Loans or their FFELP Stafford Loans. It has two aspects. The first reduces payments for students who choose Income Based Repayment, a program for borrowers who have limited income and cannot easily make their loan payments. The maximum amount these students need to pay is lowered from 15% of their annual income to 10%. The second part of the program allows students who have both Direct and FFELP loans (that is, loans directly from the government and certain loans from private banks) to consolidate those loans and reduce their interest rate by up to 0.5%. Both parts of the new program help borrowers reduce their monthly payments.
Q: What will this mean to UC Berkeley students and graduates, in terms of easing their loan burdens?
A: While UC Berkeley students tend to borrow less than the national average at public universities — our average debt for undergraduates upon graduation is just over $16,000, while the national average is $22,000 — this will definitely help students who choose Income Based Repayment, by reducing their monthly payments. Most of our students have Direct Loans, but students who transferred from other institutions may have received FFELP loans, so they may be able to consolidate and reduce their payment through this program as well. UC Berkeley supports any effort to reduce the cost of receiving a higher education.
Q: What is the campus financial aid office doing to keep student loan debt as low as possible?
A: The financial aid office has been trying for years to keep the work and loan (student self-help) expectation for all our undergraduates as low as possible. In fact, ours is the lowest in the UC system, which helps keep our students’ debt upon graduation significantly lower than the national average. UC continues to advocate for grant support from the federal and state governments, and we continue to raise funds for more undergraduate scholarships. The best way to help students avoid being thwarted by debt upon graduation is to prevent that borrowing in the first place, by raising grant and scholarship funds to award to needy students. UC Berkeley is concerned about our middle-income families as well. We took a first step toward addressing that concern this year, by offering grants of up to $3,500 for families with incomes up to $120,000 per year.