Monday, October 23

New Student Loan Regulations: What’s Changing For You?

If you have a student loan, you probably have already heard that the rate on some student loans has doubled overnight, from 3.4 percent to 6.8 percent. Why? Congress couldn’t agree on passing a bill to keep the rates at 3.4 percent.

So, is it time to panic? No. Here’s the scoop

First, if you already have a federally subsidized loan, the rate on your current loan won’t go up. The rate increase applies only to new federally subsidized loans, not to old ones.  

Stafford loans are federally subsidized, so if you already have a Stafford loan, no worries. The rate increase will not impact you.

If you were planning on applying for an unsubsidized federal loan, the rate will not increase either because of congresses failure to keep the rates low.   

Your rate also won’t increase if you are planning to get what’s called a Federal “PLUS” loan. PLUS loans happen in two ways:

  1. Your parents have to agree to be responsible for paying back the loan.
  2. You already are a graduate student. Graduate students can apply for a PLUS loan in their own names.

So, who is impacted by the interest rate increase? Students who sign up for a federally subsided loan, right now. The average federally-subsidized student loan is for 10 years. A student will pay about $300 per year more for that loan.

So what should you do if you were planning on signing a student loan in the next week or two?  If you can wait a few weeks, wait before signing. Many experts think congress will roll back the rate increase somewhere during the month of July.  

If you can’t wait a few weeks to sign for your loan, make sure you can afford the new, higher loan payment.

We’ll be posting updates on this story as it happens. For more info, be sure to check out the links on this page.

Cheers, Will

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