By: Jenn Tyborski
Heading back to class this fall, many students acquired some form of financial aid, whether it be from “free money” sources (i.e. grants and scholarships) or through federal loans.
Over the summer, the House and Senate battled over the dreaded deadline of July 1, trying to find a plan to control interest rates on federal student loans.
Congress failed to reach an agreement. Because of this, interest rates on a small batch of loans doubled to 6.8 percent. However, Congress finally came to a compromise that both Republicans and Democrats could agree upon.
On August 9, President Obama signed legislation that will tie interest rates on federal subsidized student loans to the yield of a ten-year treasury note, which indicates the government’s cost of borrowing money.
With this, interest rates will follow the market, and as the economy continues to grow, interest rates will increase with time.
Currently, rates are extremely low, and students who have federal loans disbursed after July 1 will have a fixed rate of 3.86 percent on undergraduate subsidized loans.
Although the legislation on interest rates of federal loans has changed, access hasn’t. Students will still be able to obtain loans from the government through the Free Application for Federal Student Aid (FAFSA), and students will always be able to turn to the U.S. Government to make a college education affordable.
Interim Director/Consultant of Financial Aid Jeanne Locarnini isn’t worried about the changes in interest rates. As she put it, the office “is quite happy with the way things are going.”
“The media was trying to make the story bigger than it really was,” Locarnini said. “The current situation is good for students, overall.”
Yet, when students are entering repayment after the ends of their college careers, a larger issue arises. Although many students are aware of the costs of school, some don’t fully understand the ways loans work and are in for a shock upon the time of the arrival of their first statements.
Roosevelt recognizes this issue and, according to Locarnini, has discussed forming a financial literacy program for students to learn about the real costs of college.
Once a student has applied for and received a federal loan, he or she is paired with a loan servicer. There are four major Federal Student Loan servicers, which provide loan maintenance, customer service and software systems for the Department of Education (ED).
Locarnini warned of the costs of repaying loans after college. With a financial literacy program, Locarnini hopes to help students become responsible borrowers, and to save as much as possible before school.