Released: October 29, 2011

Clearing up some confusion about the new federal student loan rules

Source: Ron Lieber, The New York Times

On Wednesday, President Obama introduced two changes to the federal student loan program that could affect several million borrowers. The broad outlines of his plans to encourage loan consolidation and assist people who are struggling financially are reasonably clear. But if the questions sent to our Bucks blog from indebted people are any indication, any change in Student Loan Land almost inevitably leads to enormous confusion. Many questions had to do with whether private loans, the kind that come from banks and often have higher and variable interest rates, are part of these changes. Nothing is changing with those loans. This is crucial, since many of the people in the worst sort of trouble — the ones you’ve read about with six-figure balances — often have both private loans and federal loans. Instead, only those with different kinds of federal loans — an estimated 5.8 million borrowers — will be able to consolidate them into one loan under the new plan and also save themselves a bit of money.

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