If you turn on the news, you are likely to hear about the pending increase of subsidized Stafford loan rates if Congress doesn't act. Rates, currently set at 3.4%, are set to double on July 1 to 6.8% - and without intervention - it will happen.
Stafford loans are a student's first choice when choosing to borrow for college. Not all students qualify for the subsidized version, under which the federal government pays any interest that accrues while the student is in school. To see if you qualify, you must submit the FAFSA and apply for financial aid at your college. If you are eligible, the subsidized Stafford loan will be included in your financial aid award letter.
Nothing will change for students who only qualify for the unsubsidized Stafford loans. Rates are currently set at 6.8% and that is where they are expected to stay.
However, many have raised the question about the fairness of rates doubling on Stafford loans for the neediest students. These families, in many cases, are already struggling to fund a college education. Repaying that education can cost the student about $5,000 more after graduation if he or she borrows the maximum subsidized Stafford limit of $23,000 under the 6.8% interest rate vs. the 3.4% interest rate.
The good news is that no one actually wants to let these rate increases happen for students. The bad news - Congress can't seem to agree on how to fund this costly interest rate reduction. Until bipartisan support is reached, the clock is ticking and students are rightly nervous about how this change will affect them.
Of course, Stafford loans have annual limits, and many students still need other sources of funding to fully meet college costs. Learn more about your other college loan options, come up with a plan for meeting college costs, or if you are a Rhode Islander or considering going to school in Rhode Island, learn more a low cost state-based Rhode Island Family Education Loan with RI Student Loan Authority.
As always, for more help with college planning, or to get assistance understanding your financial aid award letter or federal college loan options, make an appointment with the College Planning Center of Rhode Island.