The extension of reduced student loan interest rates by Congress as part of a June 29 federal transportation bill has been roundly cheered, but one local college administrator questioned what the measure will cost graduate and part-time students.
The 11th-hour bill prevented the interest rate on Direct Stafford Loans ”“ the federal government”™s primary education lending mechanism ”“ from jumping to 6.8 percent from 3.4 percent, which would have happened if Congress had not acted prior to the July 1 deadline.
Keeping the interest rate at 3.4 percent will save the average student borrower about $1,000 over the lifetime of the loan, according to President Obama, which amounts to about $6 to $9 a month. The 3.4 percent interest rate on Stafford loans was extended through June 30, 2013.
Howard Leslie, vice president of financial aid at Berkeley College, which has a White Plains campus in addition to campuses in New York City and New Jersey, called the extension “a very, very good thing.”
However, he added, “What we gave up for it is my concern.”
Starting July 1, graduate students and those pursuing professional degrees ”“ such as a law degree or medical degree ”“ were no longer eligible to receive subsidized Direct Stafford Loans.
With subsidized loans, the government pays the interest that accumulates for at least half of the time the borrower is still in school, whereas with unsubsidized loans, borrowers are responsible for paying the interest that accumulates for the full time they are in school.
Additionally, Congress imposed new limitations on future eligibility for subsidized Stafford loans.
Beginning July 1, 2013, new Stafford loan borrowers will qualify for subsidized loans for only 150 percent of the duration of their degree program.
What that means, Leslie said, is that any student pursuing a four-year degree ”“ whether attending school full-time or part-time ”“ will only be eligible to receive subsidized Stafford loans for six years of study.
Likewise, associate degree candidates will only be eligible to receive subsidized loans for three years.
Under the legislation, students who hold subsidized Stafford loans will now be responsible for paying interest that accrues during the six-month grace period between graduation and when they must begin repaying the loan. Previously, for holders of subsidized loans, the federal government paid the interest that accrued during that grace period.
“This was an earthquake that nobody heard,” Leslie said, indicating that the changes were overlooked amid relief that Congress had extended the 3.4 percent interest rate.
Leslie said Congress is effectively “putting a limit on how long a student can go to college in an age where students need to go to college and simultaneously handle so many different things.”
He said across higher education, “the whole concept of affordability has been lost.”
In response to recent changes to the Pell Grant program and other struggles experienced by students, Berkeley College gave out more than $40 million in institutional aid across all of its campuses last year, Leslie said.
He said the college has instituted a “challenge program” that will strive to assist students whose resources have been exhausted.
“When students have a major gap and we want to help them with it, it”™s what we tend to do after we”™ve exhausted everything,” Leslie said. “It”™s a loan ”¦ but if the student graduates we turn it into a grant, we totally forget it. We give you this loan, and you can make it go away ”“ just graduate.”
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