College students will be able to borrow more from Uncle Sam and pay less in fees to lenders under a federal law that takes effect this week.

It will be the first time that the annual limits on federal Stafford Loans have increased since 1992. Over the same time period, tuition rates have more than doubled.

The change provides an additional $875 a year for freshmen and $1,000 a year for sophomores. The $5,500 loan limits for juniors and seniors remain unchanged but graduate and professional students will see their loan limits increase by $2,000.

The change can help students avoid more expensive financing to pay for tuition and fees. But the new loan limits come with a catch, according to Ball State University’s Tom Taylor, vice president for enrollment, marketing and communications.

The government is not giving students more aid overall, but instead reallocating money a student may need if he or she attends a fifth year of college, Taylor said. “The government is essentially saying you can borrow more money up front, but you might start to run out on the back end if you’re in school more than four years,” Taylor said.

A parent of one incoming Ball State student said the change would be helpful. “I think it would provide students and their families more options up front,” said Pam Loeffler, whose daughter, Melissa, will attend Ball State this fall.

Since 1992, the federal loan amounts have been capped at a total of $23,000 for students whose parents claim them as dependents and $46,000 for students on their own. All graduate and professional students are considered independent.

Meanwhile, tuition has jumped. The average tuition at four-year public colleges and universities is $5,836 for the 2006-07 school year, according to The College Board.

Under the new federal law, borrowers also get a break on origination fees for their loans. These are fees paid by the borrower to the lender to cover administrative costs.

The origination fee for Stafford loans dropped from 2 percent to 1.5 percent this month. The government plans to completely phase out the fee by 2010.

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This entry was posted on Saturday, July 7th, 2007 at 9:44 pm and is filed under College Loans, Education, Student Loan. Tags: College, Loans, Student, Student Loan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.