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History of Student Loans

Year Event
2014 The U.S. Department of Education modifies the definition of an adverse credit history for Federal PLUS Loan eligibility, establishing a minimum debt threshold (initially $2,085) for 90-day delinquencies, accounts in collections and charged-off accounts for a borrower to be considered as having an adverse credit history, effective on March 29, 2015.
2014 3-year cohort default rates for federal student loans decrease for the first time since the start of the credit crisis.
2014 Sallie Mae splits into two companies, one focused on student loan servicing (Navient)
2013 Bipartisan Student Loan Certainty Act of 2013 (P.L. 113-28) switches Federal Stafford loans and Federal PLUS loans from fixed rates to hybrid fixed/variable interest rate formulas where interest rates remain fixed, but each year’s new loans disbursed on or after July 1 are at a new fixed rate based on the last 10-year Treasury rate in May
2012 Moving Ahead for Progress in the 21st Century Act (P.L. 112-141) extended the 3.4% interest rate on subsidized Federal Stafford loans to undergraduate students for an additional year and adds a 150% timeframe limitation on eligibility for subsidized interest benefits on subsidized Federal Stafford loans
2012 Consolidated Appropriations Act of 2012 (P.L. 112-74) eliminates subsidized interest on subsidized Federal Stafford loans during the six-month grace period for new loans made from July 1, 2012 to June 30, 2014
2012 Total federal and private education loan debt outstanding exceeds $1 trillion.
2011 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (P.L. 111-203) establishes the Consumer Financial Protection Bureau (CFPB) in July 2011. Rohit Chopra is appointed the first Private Student Loan Ombudsman in October 2011.
2011 Total education loan debt outstanding exceeds auto loan debt for the first time.
2011 Budget Control Act of 2011 (P.L. 112-25) eliminates subsidized Federal Stafford loans to graduate and professional students, effective July 1, 2012, eliminates the up-front fee rebate in the Direct Loan program and implements sequestration (which leads to increases in the fees on Federal Stafford and Federal PLUS loans)
2011 President Obama uses his regulatory authority to fast-track implementation of the Pay-As-You-Earn repayment plan, making it available to borrowers with at least one loan disbursed on or after October 1, 2011 and no loans disbursed prior to October 1, 2007
2010 Total education loan debt outstanding exceeds credit card debt for the first time.
2010 Health Care and Education Reconciliation Act of 2010 (P.L. 111-152) eliminates the Federal Family Education Loan (FFEL) program, effective July 1, 2010, and creates the Pay-As-You-Earn repayment plan, effective for new borrowers as of July 1, 2014
2008 Higher Education Opportunity Act of 2008 (P.L. 110-315) includes the disclosure requirements of the Student Loan Sunshine Act in the aftermath of the 2007 student loan conflict of interest scandal, requires education loan payment status to be reported to all three national credit bureaus and increases the measurement window of the Cohort Default Rate from two years to three years. New York state legislature passes the Student Lending Accountability, Transparency and Enforcement Act of 2008 (SLATE) to respond to the student loan conflict of interest scandal. SLATE and the Student Loan Sunshine Act ban lender gifts to college employees and establish new student loan disclosure requirements, including restrictions on preferred lender lists. Also adds entrance counseling requirements for all colleges.
2008 Ensuring Continued Access to Student Loans Act of 2008 (P.L. 110-227) increases annual and aggregate unsubsidized Stafford loan limits for undergraduate students, allows parents to defer Federal Parent PLUS loan payments while the student is in school and for six months after graduation and allows the U.S. Department of Education to buy FFEL program loans originated from FY2003 to FY2008
2007 College Cost Reduction and Access Act of 2007 (P.L. 110-84) implements a phased-in interest rate reduction on subsidized Stafford loans to undergraduate students (from 6.0% in 2008-09, to 5.6% in 2009-2010, to 4.5% in 2010-2011 and to 3.4% in 2011-2012), adds income-based repayment effective July 1, 2009, adds public service loan forgiveness effective October 1, 2007 and cuts government payments to FFEL program lenders and guarantee agencies to fund improvements in student aid
2007 The New York Attorney General, Andrew Cuomo, accuses lenders, colleges and financial aid administrators of engaging in revenue-sharing agreements and kickbacks, obtaining millions of dollars in settlements
2006 Emergency Supplemental Appropriations Act for Defense, the Global War on Terror and Hurricane Recovery, 2006 (P.L. 109-234) repeals the single holder rule, effective June 15, 2006. Extends student loan forgiveness to parents and spouses of victims of the September 11, 2001, terrorist attacks
2005 In Lockhart v. US (04-881, December 2005), the U.S. Supreme Court affirms the federal government’s authority to offset Social Security disability and retirement benefit payments to repay defaulted federal education loans, without a statute of limitations
2005 Higher Education Reconciliation Act of 2005 (P.L. 109-171) creates the Federal Grad PLUS loan program, increases annual loan limits without increasing aggregate loan limits, changes the fixed interest rate on the Federal PLUS loan from 7.9% to 8.5% (but only for the FFEL program, not the Direct Loan program) effective July 1, 2006, cuts Federal Stafford loan fees from 4% to 1%, repeals the early repayment status loophole, limits the School as Lender program, increases wage garnishment for defaulted federal education loans from 10% to 15% of income and tries to eliminate the 9.5% floor income guarantee
2005 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (P.L. 109-8) adds an exception to discharge for qualified education loans, which includes most federal and private student loans
2005 The U.S. Department of Education acknowledges the validity of the early repayment status loophole discovered by Mark Kantrowitz, allowing students to consolidate their federal student loans while they are still in school to lock in rates as low as 2.875%, saving students billions of dollars of interest
2004 Sallie Mae becomes a private company
2003 Servicemembers Civil Relief Act (P.L. 108-189), as amended, caps interest rates on federal education loans at 6% during active duty service and adds military service deferment for up to 60 months.
2002 An unnamed piece of legislation (P.L. 107-139) switches federal education loan interest rates from variable rates to fixed rates (6.8% Stafford and 7.9% PLUS), effective for new loans made on or after July 1, 2006
2001 The U.S. Department of Education begins offsetting up to 15% of Social Security benefit payments to repay defaulted federal education loans. The 60-month limit on the student loan interest deduction is repealed and the deduction’s income phase-out is increased.
2000 FFEL program lenders sue to try to block the U.S. Department of Education from offering loan discounts to Direct Loan borrowers
1999 The U.S. Department of Education’s Direct Loan program introduces interest rate reductions and fee rebates to compete with similar discounts offered by FFEL program lenders
1998 Higher Education Amendments of 1998 (P.L. 105-244) changes the definition of default from 180 days delinquent to 270 days delinquent (plus a 90-day claim period), adds the extended repayment plan, cuts Federal Stafford loan interest rates by 0.80%, caps Federal Consolidation Loan interest rates at 8.25% (rounded at nearest 1/8th of a percent instead of nearest whole percent), repeals the ability to discharge student loans in bankruptcy after 7 years in repayment and establishes Teacher Loan Forgiveness
1997 Taxpayer Relief Act of 1997 (P.L. 105-34) creates the Student Loan Interest Deduction
1996 Debt Collection Improvement Act of 1996 (P.L. 104-134) authorizes the offset of Social Security benefit payments to repay defaulted federal education loans
1996 Student Loan Marketing Association Reorganization Act of 1996 (P.L. 104-208) approves the privatization of Sallie Mae, then a Government-Sponsored Enterprise (GSE)
1993 Student Loan Reform Act of 1993, part of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) establishes the Direct Loan program (William D. Ford Federal Direct Loan Program) and adds the income-contingent repayment plan
1992 Higher Education Amendments of 1992 (P.L. 102-325) adds unsubsidized Federal Stafford Loan option (not restricted by demonstrated financial need), creates Direct Loan pilot and repeals Federal PLUS loan limits. Also, implements a new need analysis formula (Federal Methodology) that extends eligibility for aid (particularly, loans) to a larger subset of middle-income students.
1991 Emergency Unemployment Compensation Act of 1991 (P.L. 102-164) allows the U.S. Department of Education to garnish up to 10% of disposable income to repay defaulted federal education loans
1991 Higher Education Technical Amendments of 1991 (P.L. 102-26) eliminates the 6-year statute of limitations and the defense of laches on federal education loans
1990 Crime Control Act of 1990 (P.L. 101-647) changes the delay before a student loan could be discharged in bankruptcy from 5 years to 7 years
1990 Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) requires colleges to maintain low cohort default rates to retain institutional eligibility for Title IV federal student aid
1989 Entrance counseling added as a recommendation for colleges that were required to adopt a Default Management Plan.
1987 GSL program becomes the Federal Stafford Loan program, named after Senator Robert T. Stafford of Vermont
1986 Higher Education Amendments of 1986 (P.L. 99-498) renames the National Defense Student Loan as the Federal Perkins Loan, creates the Supplemental Loan to Students (SLS) for graduate, professional and independent students, adds Federal Consolidation Loans, restricts eligibility for Federal PLUS loans to parents of undergraduate students, adds exit counseling
1986 Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272) changes the definition of default from 120 days delinquent to 180 days delinquent (plus a 90-day claim period)
1984 Bankruptcy Amendments and Federal Judgeship Act of 1984 (P.L. 98-353) strikes "of higher education" from "nonprofit institution of higher education" in the U.S. Bankruptcy Code, allowing private student loans to be excepted from discharge if they were associated in any way with a nonprofit organization
1981 Financial need was reintroduced as a condition of eligibility for guaranteed student loans. An origination fee of 5% was imposed on borrowers.
1980 The Education Amendments of 1980 (P.L. 96-374) establishes the Federal PLUS loan
1979 P.L. 96-56 modifies the requirements for a student loan to be excepted from discharge (includes loans guaranteed or funded in whole or in part by a governmental unit in addition to loans made by a governmental unit, excludes deferments and forbearances from the 5-year period before a student loan can be discharged in bankruptcy) Provide banks and other financial institutions a market rate of return on guaranteed student loans by tying lender subsidies to changes in Treasury bill rates.
1978 Middle Income Student Assistance Act of 1978 (P.L. 95-566) eliminates income restrictions on eligibility for the Guaranteed Student Loans (GSL)
1976 Regulations implemented that excepted certain student loans from bankruptcy discharge unless they represent undue hardship for the borrower and the borrower’s dependents, unless the loans had been in repayment for 5 years or more (enacted into law in 1978; prior to 1976, student loans were not excepted from bankruptcy discharge)
1976 Education Amendments of 1976 (P.L. 94-482) creates state loan guarantee agencies
1972 The Student Loan Marketing Association (known as Sallie Mae) is created as a Government-Sponsored Enterprise (GSE) to provide liquidity to federal education loan lenders through the establishment of a secondary market for federal education loans
1965 Higher Education Act of 1965 (P.L. 89-329) creates the Guaranteed Student Loan (GSL) program, which will eventually become the Federal Stafford loan program
1963 Health Professions Educational Assistance Act of 1963 (P.L. 88-204) creates federal student loan programs for students in the health professions
1958 National Defense Education Act (P.L. 85-864) creates the National Defense Student Loan (NDSL) program, which will eventually become the Federal Perkins loan program
1840 Harvard College establishes the first student loan program
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