Money is a sensitive subject for many college students – from budgeting a monthly allowance to having a regular job and paying for living and school expenses. On July 1, students and their families may face one more hiccup when it comes to managing their finances. Although the director of financial aid at TCU said lenders will be most affected by a bill recently passed by the Senate to cut $12.7 million from federal student loan programs over the next five years, many worry students and families will be burdened with even more college-related debt. The new legislation will not reduce the number of students eligible for loans, but it will increase interest rates on student and parent loans.
The interest rate on Stafford loans, which are popular because students don’t have to demonstrate need in order to qualify, will be fixed at 6.8 percent rate. This is a noticeable difference when compared to the current system, where rates are as low as 4.7 percent. Presently, interest rates on Stafford loans fluctuate and are reset annually depending on the market.
In addition, parent loans for undergraduate students, also known at PLUS loans, would have a fixed interest rate of 8.5 percent. Like the Stafford, Rates for PLUS loans are currently as low as 6.1 percent. The new legislation would bring interest rates for the PLUS loans to just under the current 9 percent cap, making parent loans far less attractive.
These new changes are coming at a time when tuition bills across the nation have been on the rise, and more students and families are struggling to keep up with the increases. According to the Wall Street Journal, private-college tuition and fees have increased by 37 percent over the past decade, and public tuition has increased by 54 percent.
Whether students and their families will be directly affected by the new legislation can only be determined over time, but the fixed interest rates would suggest they will soon feel the pinch.
Editor in Chief Courtney Reese for the editorial board