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New student loan regulations announced

Students looking to take out subsidized federal loans for the first time will face new regulations and limits on how much they can borrow.

Starting July 1, students applying for a need-based Direct Subsidized Loan will be limited to borrowing only enough money to cover one-and-a-half times the length of their program of study.

This means that an undergraduate student working on a four-year degree will be able to borrow only enough to cover two additional years of schooling, should extra time be needed to graduate.

Christina Negrete, director of financial aid for Southern Oregon University, said the changes are an effort to help students reduce the debt they accumulate during their college years.

If a student still is in need of money, they will be limited to unsubsidized loans, scholarships, grants and student employment.

With subsidized loans, borrowers pay 3.4 percent interest, and payments begin when students leave school or drop below half-time enrollment. Direct Unsubsidized Loans begin accumulating 6.8 percent interest when the money is received.

"I think it'll be a little bit of a challenge," said Negrete. "It's a complicated issue."

The loan limitations may dissuade some students from taking classes outside of what they need for their degrees so they will graduate within the time their loan allows. However, the new regulations will apply only to new borrowers, so a student taking out a loan on or before June 30 will not be subject to the limitation.

Because Southern Oregon University does not offer associate degrees, most students are enrolled in four-year programs or longer and would be eligible for subsidized loans for up to six years or more. Negrete said she does not believe this restriction will hinder students at SOU or impose too tight of a time limit for graduation.

"Six years is still pretty generous," she notes.

Students also will see changes after June 30 in how much they can receive from Federal Pell Grants and the Oregon Opportunity Grant.

According to the Federal Student Aid website, Expected Family Contribution standards will change, which will reduce the number of students eligible for financial aid. The lower a student's EFC number, the more aid is available to them. Students who come from families that earn $23,000 a year or less will receive an EFC of zero.

Shannon Houston is a Southern Oregon University intern. Reach her at shouston@mailtribune.com.