The Interest-ing News about Student Loans
By Kristina Delbridge, director, Financial Aid
August 26, 2013
Students who have received a federal student loan that disbursed on or after July 1, 2013 or are planning to receive loans for the upcoming fall and spring terms, will be happy to hear that their interest rate will be reduced. Subsidized and unsubsidized direct loans for that timeframe were initially charged at a 6.8 percent interest rate. After much debate and negotiation by Congress, however, President Obama signed the Bipartisan Student Loan Certainty Act on Aug. 9, 2013, which sets the interest rate based on a fixed amount added to the 10-year Treasury Note Index rate.
Undergraduate students whose loans disburse between July 1, 2013 and June 30, 2014 will instead have an interest rate of 3.86 percent for both the subsidized and unsubsidized loans. Graduate students will have an interest rate of 5.41 percent for unsubsidized loans for that same time period. Parents borrowing PLUS loans also will get relief, with the rate shifting from 7.9 percent down to 6.41 percent. Interest rates for loans disbursed July 1, 2014 - June 30, 2015 will be determined after the publication of the bond equivalent rate of the 10-year Treasury Note Index in June 2014.
Not changed by this legislation is the limitation to subsidized loans that went into effect beginning this summer for first-time federal subsidized direct loan borrowers (defined as a person who has no federal direct student loan debt balance) due to the passage of MAP-21. First time student loan borrowers who had a subsidized loan disburse on or after July 1, 2013 are no longer eligible for subsidized student loans if he or she exceeds 150 percent of the published length of the undergraduate degree program. Previously, if a student were to change majors, overall subsidized loan borrowing, other than aggregate limits for $ 23,000, were not affected. While this change is not expected to affect as many students, it is something that students should be aware of as they progress through their college career, if they plan to obtain student loans.
Bipartisan Student Loan Certainty Act : http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.1911:::
Moving Ahead for Progress in the 21st Century Act (MAP-21): http://www.gpo.gov/fdsys/pkg/BILLS-112hr4348enr/pdf/BILLS-112hr4348enr.pdf