Student Loan Law May Raise Interest Rates

September 16, 2013, Written By Justin Hefner
Student Loan Law May Raise Interest Rates

In August, Congress made a plan to change federal student loan interest rates from fixed to market based. The worse the economy, the lower the interest rate would be.

This may seem like a good idea at first, especially since it will lower the interest rate from 6.8% to 5.4% right now. However, that benefit will not last forever. Some analysts say that it could raise the interest to the cap of 9.5% as the economy improves.

That 9.5% cap does not apply to all students. Undergrads have a cap of 8.25%.

This is upsetting to the graduate students that have a student loan. They feel they should not be charged any more than their baccalaureate-pursuing counterparts.

“There has been a large focus on undergraduate education–which we support–but it definitely feels like there has been a marginalizing of graduate students in terms of student loans,” said Meredith Niles, director of legislative affairs at the National Association of Graduate-Professional Students. “Over the long term, it’s going to be a disaster.”

According to the College Board, graduate students accounted for 67% of the aid distributed to college students throughout the 2011-2012 school year. Thus, by potentially charging grads more interest than undergrads, the government stands to make a lot of extra money.

Graduate students want to have a 6.8% interest rate cap, and they want to bring back the subsidized loan program that allows them to start repayments after graduation.

The information contained within this article was accurate as of September 16, 2013. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.

About Justin Hefner

Justin Hefner is in the education field and has written about a number of financial issues. He holds a Bachelor of Arts degree from Texas Tech University and a Masters in Education from Texas State University.
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