Funding for student loans

Financing college is likely to get easier, thanks to a bill sailing through Congress.The Ensuring Continued Access to Student Loans Act of 2008, passed by the Senate on Wednesday, would let parents and students borrow more from the government. It could also boost grants for some needy high achievers.The House has passed its own version of the bill. Here's a rundown on the proposal and how it could affect you.The continuing credit crunch has caused about 65 lenders to back out of the student loan market in the last three months. Currently, students borrow about $85 billion a year to finance higher education. With college costs rising and the economy slowing, legislators say student loans are more important than ever. House and Senate leaders agreed to provide more government backing for so-called unsubsidized Stafford loans -- the most common type of federally guaranteed loan. This is likely to save students millions of dollars by letting them forgo costly private loans.The bill is projected to make money for the government -- $450 million over five years. Lawmakers agreed to use those funds toThere are three common types of student loans: subsidized Staffords, unsubsidized Staffords and private loans. Both types of Stafford loans have fixed interest rates and terms set by the government. Any Stafford loan taken out after July 1 will have a fixed rate of 6% for the life of the loan. The difference between subsidized and unsubsidized Stafford loans is that the federal government pays the interest on the subsidized loan while the student is in school; the interest accrues on an unsubsidized Stafford loan while the student is in school and must be repaid when the student graduates.The government would boost the maximum amount that students can borrow under the unsubsidized Stafford program with this legislation. This bill does not affect subsidized Stafford loans. Maximum loan limits vary, but for typical freshmen the amount they can borrow under the unsubsidized Stafford program will rise to $5,500 from $3,500. Sophomores will be able to borrow $6,500, up from $4,500. Juniors and seniors will be able to borrow $7,500, compared with $5,500 currently.These hikes are likely to reduce student reliance on private loans, which now account for roughly one-quarter of all funds borrowed for college. These loans' interest rates and terms aParents now can borrow under the Parents Loans for Students program, known as PLUS. The catch with a PLUS loan is that borrowers must start repaying within 60 days of disbursement. This legislation would let parents defer repayment while their child is in school. Interest on the loan would accrue while the repayment is deferred, which can prove costly, but it provides an option for parents who can't afford to repay the loans while their children are in college.re set by the lender; some have rates as high as 20%. boost grants for needy students.