SAVMA's Gov't Affairs Committee speaks on loss of subsidized loans

Dear Veterinary Medical Students,

As some of you may know, in response to the current economic challenges, there have been some adjustments to Federal budgets. A significant change that has taken place is the loss of subsidized loans to graduate and professional students. The Budget Control Act (BCA) of 2011 was signed into law on August 2nd, 2011. The signing of this act into law made two very important changes to the William D. Ford Direct Loan Program, which affects the majority of veterinary medical students utilizing loans to pay tuition and living expenses.
We would like to make you aware of the effort that the AVMA and your SAVMA representatives have put forth urging Congress to maintain the subsidized Federal Stafford loan for graduate and professional students. In letters sent to all congressional members of Vice President Biden’s bipartisan Deficit-Reduction Panel, the AVMA and its coalition partners noted the current loan policies in place for graduate and professional students are not the cause of the budget deficit. The letters also warned Congress that eliminating the subsidized Federal Stafford loan could "harm our nation's ability to cultivate and develop highly skilled individuals who would be future leaders in business, government, medicine, science and technology." The coalition also noted the impact that the removal of subsidized loans would carry on those students who are disadvantaged or are already carrying debt from their undergraduate education when they begin professional school. It was stated that on average, the cumulative loan debt of students earning doctoral degrees graduate with about $77,000 in debt. The average educational debt of a graduating veterinary, medical and dental student ranges between $134,000 and $186,000, with over 87 percent of graduates reporting indebtedness.
Despite AVMA and SAVMA efforts beginning on or after July 1, 2012 graduate and professional students are no longer eligible to receive Federal Direct Subsidized Loans. However, Direct Subsidized Loans received during loans periods before July 1, 2012 will not be affected.
The aggregate loan limit for graduate and professional students has remained unchanged at $138,500 ($224,000 for certain professional students).
The annual loan limit for graduate and professional students remains unchanged at $20,500 ($47,167 for certain health professional students). However, Direct Subsidized Loans are no longer available for professional students. In the past, up to $8500 of Direct Subsidized Loans were available, meaning the Federal government paid your interest on the loan while you are in school. Now, the entire amount of the loan is unsubsidized. This means that you are completely responsible for the entire amount and interest will be charged to your account and begin accrual on the day the loan is disbursed. For a student borrowing the maximum amount, this will add $207 per month in interest charges to the loan.
Another BCA change that will be made effective July 1, 2012 is the Termination of Direct Loan Borrower Repayment Incentives. The BCA has terminated the authority of the Department of Education to offer any repayment incentives to Direct Loans Borrowers. Historically, repayment incentives have been used to encourage timely payment of loans. As a result of this loss of incentives the up-front interest rebate
that has been provided to Direct Loan borrowers at the time of loan disbursement will no longer be offered on any Direct Loan Program loan with a first disbursement date that is on or after July 1, 2012. The law does, however, continue to authorize the Department of Education to offer interest rate reductions to those borrowers who agree to have payments automatically electronically debited from a bank account.
The AVMA and SAVMA are currently working with members of Congress to restore the loan subsidy. To stay involved with current legislation and make sure your voice is heard in Washington join the AMVA-Congressional Action Network. Resources for students to learn about how to manage finances, how SAVMA is working to provide education on economic issues, or how the AVMA has advocated for students and statements released regarding this issue can be found at http://www.avma.org/press/releases/110802_in-school-subsidy-elimination.asp.

Sincerely,
SAVMA Governmental Affairs Committee
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