SAN MATEO, CALIF., Aug. 31, 2010 -- For many U.S. students, college debt is a significant problem, with the average graduate owing $23,186, but Freedom Debt Relief (FDR) anticipates that the student loan regulations signed into law this year will ease the situation a bit for students.

"The new rules are part of a larger government strategy that attempts to streamline the government's financial regulatory system, create long-term job growth by helping more people attend college, and make student loan debt -- one of the few types of debt that can be healthy -- more affordable," explained Andrew Housser, co-founder and CEO of FDR.

Students should have greater access to loans and grants at more affordable terms, while the government projects to save $68 billion from implementing the new regulations, which President Obama signed into law in March and which took effect July 1, in time for this year's school terms.

"These regulations should ease the debt burden on students and their parents, making education more attainable," Housser added. "In addition, the new rules have spurred further reforms in educational lending, such as the rules just announced that limit student loans issued to students attending for-profit colleges."

The key points of the regulations affect students as follows:

1. Banks are cut out of the process. Banks can no longer issue federally backed student loans. Instead, student loans will be issued from the government directly. (Banks can issue private loans, however.) Because government loans have more favorable terms, students are wise to seek out federally backed loans before pursuing private student-loan financing.
2. The application process is simpler. Most students only need to complete the Federal Application for Student Aid (FAFSA) form. Schools will submit the form directly to the government to complete the loan funding process. Multiple applications and promissory notes are no longer necessary.
3. Pell Grants are more accessible. Federal Pell Grants, which help the poorest students pay for higher education, receive more funding under the new rules. Eligibility rules have changed so that more families will qualify. The maximum grant amount has increased to $5,500 for the 2010-2011 school year and will rise to nearly $6,000 by 2020.
4. More federal loans mean more manageable interest rates. Private loans often have much higher interest rates than federal-backed student loans. Over the next few years, federally guaranteed student loan rates will be even better, dropping by law from a current annual interest rate of 4.5 percent in 2010-11 to a rate of 3.4 percent in 2011-12.
5. Repayment periods are limited, especially for public servants. Loan repayment periods will be capped at 25 years for most borrowers. (For loans issued after 2014, the repayment period will be limited to 20 years.) At that point, the government will forgive education debt that has not been repaid at the agreed-upon terms. Public servants, such as teachers, police officers, nurses, military service members and fire fighters, can have remaining student-loan debt forgiven after just 10 years.
6. Payment percentages are eased. Borrowers who take out loans after 2014 will be able to have their monthly payments capped at 10 percent of monthly income if they qualify for an income-based repayment program. The current level is 15 percent of monthly income.
7. Parents benefit, too. Parents of undergraduates who borrow using a PLUS (Parent Loans for Undergraduate Students) will benefit from the new regulations with a simplified application process and lower interest rates.
8. For-profit institutions face tighter requirements. Not part of the student-lending bill, but as a follow-up to recent questions about the status of for-profit colleges, the U.S. Department of Education recently proposed new rules for borrowing to attend these schools. For-profit colleges and universities now must ensure student loans do not outweigh students' anticipated salaries after graduation.

About Freedom Debt Relief (www.freedomdebtrelief.com)
Freedom Debt Relief provides consumer debt settlement services. Working for the consumer to negotiate with creditors and lower principal balances due, the company has served more than 80,000 clients since 2002. The company is an accredited member of The Association of Settlement Companies and holds "platinum" member status with the International Association of Professional Debt Arbitrators. FDR holds the Goldline Research Preferred Provider certification for excellence among debt settlement companies.

Freedom Debt Relief is a wholly owned subsidiary of Freedom Financial Network, LLC (FFN). Based in San Mateo, Calif., FFN also operates offices in Sacramento and Tempe, Ariz. The company, with more than 600 employees, was voted one of the best places to work in both the San Francisco Bay area and the Phoenix area in 2008 and 2009.

###