Higher Education Reconciliation Act of 2005 (HERA) FAQ

Q.  What did the Higher Education Reconciliation Act of 2005 (HERA) do to my interest rates?
A.  The HERA set a fixed interest rate of 6.8% for all Stafford loans and 8.5% for all FFELP PLUS loans first disbursed on or after July 1, 2006.  (PLUS loans taken through Direct Loans for the same time period will have a fixed interest rate of 7.9%.)  That means that any new loan first disbursed on or after July 1, 2006 will always have the same interest rate for the life of the loan.

Q.  Does that mean my Stafford loan from last school year is now also 6.8%?
A.  No, the new fixed interest rate is only for loans that were first disbursed on or after July 1, 2006.  If you had a Stafford loan or your parents took out a PLUS loan prior to that, those loans will continue to change interest rates every year on July 1. 

Q.  I’m now in Graduate School and have been awarded all of the Stafford loans that I’m eligible for.  Are there any options besides private loans?
A.  Yes, with the passage of the HERA, Graduate and Professional School students are now eligible to take loans under the same PLUS program that parents have been for years.  In order to be eligible, a Graduate or Professional student must have been awarded the maximum they were eligible for under the Stafford loan program.  Graduate and Professional borrowers looking to take advantage of the PLUS program are subject to the same terms and conditions applicable to parents borrowing a PLUS loan, such as not having an adverse credit history, immediate entry into repayment after the loan is fully disbursed, and a fixed 8.5% interest rate for FFELP PLUS loans.

Q.  What were the changes to Stafford Loan Limits by the HERA?
A.  The maximum amount borrowers can be certified by the school to borrow was actually increased by the HERA.  Starting with the 2007-2008 award year, for first year students, the maximum combined amount of Subsidized/Unsubsidized loans increased from $2625 to $3500 and from $3500 to $4500 for second year students. 

Q.  Were there any new grant programs created by the HERA?
A.  The Academic Competitiveness Grants (ACG) and Science and Mathematics Access to Retain Talent (SMART) Grants were two grant programs implemented by the HERA for full-time students at degree-granting institutions who are also eligible for Pell Grants for the 2006-2007 award year. 

Q.  What are the requirements for the ACG?  What is the maximum amount for the grant?
A.  For the ACG, you must be a first or second year student who is a US citizen, enrolled in a degree-granting program at two-year or four-year institution.  You must also receive a Pell Grant, and have completed a rigorous secondary school program of study prior to January 1, 2006 for first year students and prior to January 1, 2005 for second year students.  First year students must not have previously enrolled in an undergraduate program and may be eligible for up to $750.  In your second year, you must attain a cumulative 3.0 grade point average on a 4.0 scale and may be eligible for up to $1300.

Q.  What are the requirements for the SMART Grant?  What is the maximum amount for the grant?
A.  You may receive a SMART Grant for up to $4000 each year for your third and fourth academic years if eligibility requirements are met.  To be eligible, you must be a US citizen receiving a Pell Grant and be enrolled in a full-time course of study at a four-year degree-granting institution.  You must also be majoring in physical, life or computer science, engineering, mathematics, technology, or a critical foreign language and have at least a cumulative grade point average of 3.0 on a 4.0 scale in coursework required for your major.