JEFFERSON CITY, Mo. - The last few years have seen federal legislation change the backdrop of college financial aid across the nation. As lenders, school financial aid offices, and all participants throughout the student loan industry adjust to new regulations, the Missouri Department of Higher Education (MDHE) remains focused on keeping higher education affordable for Missouri students.

As a protection to borrowers, the MDHE, Missouri's designated Federal Family Education Loan Program (FFELP) guaranty agency, has announced that it will subsidize the federal default fee (FDF) on all MDHE-guaranteed student loans obtained for attendance at Missouri schools for the 2008-2009 academic year. The FDF, federally mandated by the Higher Education Reconciliation Act of 2005, is a 1% fee assessed against all Stafford and PLUS loans to help offset the cost associated with defaulted student loans.

"While lenders and servicers previously subsidized the FDF on MDHE-guaranteed FFELP loans, recent cuts in federal funding have made it difficult for them to maintain this practice. The MDHE has decided to extend the subsidy so borrowers with loans guaranteed by the MDHE will not have to incur this extra cost," said Leanne Cardwell, Assistant Commissioner with the Missouri Department of Higher Education.

The MDHE’s commitment to subsidize the federal default fee on MDHE-guaranteed loans will translate into a projected total savings of $7 million realized by students and families using Missouri FFELP loans to help finance their educational dreams.

All Stafford and PLUS loans guaranteed by the MDHE between July 1, 2008 and June 30, 2009 for attendance at a Missouri postsecondary institution will be eligible for the subsidy.