Students Celebrate Loan-Interest Win, But Brace for Other Changes
In a White House ceremony this afternoon, President Obama will make permanent the law keeping federally subsidized student-loan interest rates at 3.4 percent for the next year. Congress reached a compromise last Friday, and the legislation was signed by the presidentbut only temporarily. Today's event will allow the administration to seize the political moment and photo opportunity to remind young voters of the win on their behalf.
Student advocates are praising the long-awaited action, but many acknowledge it's only a temporary fix and a small victory in the fight for college affordability. The measure came at an expense to borrowers. To cover part of the $6 billion needed to keep interest rates low, eligibility for a federally subsidized loan for undergraduates will be capped to 150 percent of a program's standard completion time. So, a student at a four-year college will no longer be able to receive a loan with an interest subsidy after six years or a community college after three.
The Project on Student Debt, an initiative of the Institute for College Access and Success, has developed a useful guide to the changes in the Pell Grant and student-loan programs for the upcoming year on its website.
Some of the changes affecting students are the result of cost-cutting congressional moves in the federal budget deal earlier this year. While students affected by last week's legislation (7 million who will save an average of $1,000 in finance fees) are celebrating, other recent policy moves that aren't so encouraging:
•Until July 1, 2014, there is no longer a six-month, interest-free grace period after graduation for holders of subsidized Stafford loans taken out this year and next.
•Graduate and professional students can no longer get subsidized federal loans, as of July 1.
•Eligibility for Pell Grants are now extended to students for just 12 semesters, not 18, as in the past.
•Students who don't have a high school diploma or GED no longer quality for Pell funding.
With the student-loan landscape so fluid and borrower's debt averaging $25,250, educators and consumers are in need of concrete advice. Check out Top Ten Loan Tips for Recent College Graduates from the institute. From paying off the most expensive loans first, to staying in touch with the lender, and information about loan forgiveness, the list is a helpful place for studentsand their advisersto get on track with their financial life after college.
Having successfully mobilized students for the recent interest-rate freeze legislation, advocacy groups hope to keep that energy going into the next budget cycle to fight for Pell Grants and other higher education issues.