Congress Keeps Student Loan Rates at 3.4%
Millions of students breathed a sigh of relief last Friday when Congress passed a bill that would keep interest rates for federal student loans at 3.4%. Without this measure, rates on Stafford loans would have doubled to 6.8% on Saturday, creating an additional $1,000 in student loan fees per student.
A whopping 7.4 million young Americans currently take out Stafford loans, making them the nation’s most popular student loan. What’s the attraction? On some Stafford loans, known as subsidized Stafford loans, students do not need to pay interest while they are enrolled in school and only start paying interest after they graduate.
While lower interest rates are always a reason to celebrate, Friday’s legislation does change a few things: For one, graduate students are no longer eligible for subsidized Stafford loans. Instead, they’ll owe interest as soon as they begin receiving money which, according to the American Council on Education, will cost students of higher education an extra $7,000.
And that’s not all–under the new law, undergrads enrolled in school will only be exempt from paying interest on a Stafford loan for a maximum of six years. Even if students are in school for longer, they’ll need to start paying interest after this point.
Friday’s law will keep interest rates down for the next year, but next summer, legislators will vote again on the issue. Students might not be out of the woods just yet, but with the nation’s total student loan debt ringing in at a staggering $1 trillion, we’re glad to see Congress working for the next generation.