AppId is over the quota
July 14th, 2012 by Ken
Finally congress came to a conclusion on the fate of the interest rate on subsidized Stafford loans for undergraduates.
Both congress and the senate voted in favor of keeping the rate at 3.4% for undergraduate subsidized Stafford loans that was originally scheduled to double to 6.8% as of July 1, 2012.
However, in great political fashion and at the last minute, congress decided to continue this lower rate for at least another year. However, this one year extension will cost about $6 billion to subsidize, and will leave congress in the same position this time next year when they must decide if they will re-up the low rate. Many see this as political grand standing from both sides of the aisle, going into an election year with an unpredictable youth vote on the radar. No politician wants to be labeled “anti-student” or “anti-education” by voting against the extended subsidy, so it became more politically prudent to kick the can down the road.
Meanwhile, many undergraduate students will be happy to know that they can access this lower rate on the subsidized Stafford loan for another year, they just need to be on notice; Never before has capital hill wrangled so much over educational funding. Even the Pell Grant program was under fire just last year. The government has to make increasingly more convoluted political deals to maintain funding that was normally taken for granted. Consider that in order to get this loan subsidy extended, it had to be tied to a bill for lawmakers’ authority to spend money on federal transport initiatives. The clock is ticking on grant and subsides for higher education when there already exists such a high deficit as there is now.
However, what many do not realize is that the Grace period for subsidized Stafford loans has been extinguished. Traditionally, the subsidized Stafford loan grace period would be an extension of the interest subsidy up to six months after graduating or dropping out of school. This was a money saver for students just out of school, where any interest that accrued on the subsidized Stafford loan would be paid for by the government during the grace period. It’s gone now.
Instead, interest on subsidized Stafford loans will begin to accrue immediately when the student graduates or exits school. Grace period will now only mean that students are not responsible for any payments towards their loans, but interest will accrue normally. Thankfully, it will be at a reduced rate of 3.4%, for now. Next summer will be a new congressional session to decide the fate of student loan subsidies.
The subsidized Stafford loan for graduate level students has already been eliminated as of July 1, 2012, leaving only unsubsidized Stafford loans at 6.8% available for advanced degrees.
Tags: aisle, dropping out of school, educational funding, election year, federal transport, grace period, higher education, interest rate, interest subsidy, lawmakers, money saver, pell grant program, political deals, politician, subsidized stafford loan, subsidized stafford loans, transport initiatives, undergraduate students, undergraduates, youth vote
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