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Subsidized Stafford loan interest rate might be cut in half if act passes
By Cheryl Scott
Daily News staff writer
Today the U.S. House of Representatives will vote on the College Student Relief Act of 2007, which would decrease the amount of loan debt for many college students.
The proposal is part of Congress' � legislative hours” plan and if passed, would reduce the interest rate on subsidized Stafford loans from 6.8 percent to 3.4 percent over the course of five years, according to a recent report by the U.S. Public Interest Research Group.
Subsidized Stafford loans can be taken out by students who demonstrate financial need, said Jane Hessian, director of financial aid at Beloit College. The government pays for the interest on subsidized Stafford loans while students attend school, but students pay the interest after graduation.
If the act is passed, the new interest rate for subsidized Stafford loans would be phased in as follows:
2007-2008 - 6.12 percent interest rate
2008-2009 - 5.44
2009-2010 - 4.76
2010-2011 - 4.08
2011-2012 and on - 3.4
“If students have a lower interest rate on their loans, the loans are easier to handle,” Hessian said.
Students taking out subsidized Stafford loans with different interest rates could consolidate loans into one loan after graduation at the weighted average of interest rates, according to Wisconsin Public Interest Research Group.
The proposed act would help 5.5 million subsidized Stafford loan borrowers nationwide and about half of the students attending Beloit College pay off loans. In the 2006-2007 school year, 589 Beloit College students took out subsidized Stafford loans out of the approximately 1,300 students who attend the college, according to Cynthia Gray, director of institutional research and planning at Beloit College.
If the College Student Relief Act of 2007 passed, “the average Beloit College student starting school in 2007 would save $2,000 over the life of his or her loans,” according to WISPIRG. In 2011, when the new interest rate of 3.4 percent is finally phased in, the average student with subsidized Stafford loans at Beloit College would save $4,260, WISPIRG stated.
In order to offer a lower interest rate on subsidized Stafford loans, the government would pay less money to lenders, banks would not receive as much money when students default and banks would have to pay more in fees, the Associated Press reported.
The House is expected to approve the bill, but the Senate's approval is uncertain.
By the numbers at Beloit College
$288,187 - amount of subsidized Stafford loans Beloit College gave out in 2006-2007
$21,377 - average loan indebtedness for spring 2006 graduates
$2,624 to more than $60,000 - range of loan indebtedness for spring 2006 graduates
589 - number of Beloit College students receiving subsidized Stafford loans in the 2006-2007 school year
582 - students receiving subsidized Stafford loans in 2005-2006
610 - students receiving subsidized Stafford loans in 2004-2005
$96,979 - median family income for all Beloit College students
$62,466 - average family income for students who received the subsidized Stafford loan in the 2006-2007 school year
Source: Cynthia Gray, director of institutional research and planning at Beloit College
The proposal is part of Congress' � legislative hours” plan and if passed, would reduce the interest rate on subsidized Stafford loans from 6.8 percent to 3.4 percent over the course of five years, according to a recent report by the U.S. Public Interest Research Group.
Subsidized Stafford loans can be taken out by students who demonstrate financial need, said Jane Hessian, director of financial aid at Beloit College. The government pays for the interest on subsidized Stafford loans while students attend school, but students pay the interest after graduation.
If the act is passed, the new interest rate for subsidized Stafford loans would be phased in as follows:
2007-2008 - 6.12 percent interest rate
2008-2009 - 5.44
2009-2010 - 4.76
2010-2011 - 4.08
2011-2012 and on - 3.4
“If students have a lower interest rate on their loans, the loans are easier to handle,” Hessian said.
Students taking out subsidized Stafford loans with different interest rates could consolidate loans into one loan after graduation at the weighted average of interest rates, according to Wisconsin Public Interest Research Group.
The proposed act would help 5.5 million subsidized Stafford loan borrowers nationwide and about half of the students attending Beloit College pay off loans. In the 2006-2007 school year, 589 Beloit College students took out subsidized Stafford loans out of the approximately 1,300 students who attend the college, according to Cynthia Gray, director of institutional research and planning at Beloit College.
If the College Student Relief Act of 2007 passed, “the average Beloit College student starting school in 2007 would save $2,000 over the life of his or her loans,” according to WISPIRG. In 2011, when the new interest rate of 3.4 percent is finally phased in, the average student with subsidized Stafford loans at Beloit College would save $4,260, WISPIRG stated.
In order to offer a lower interest rate on subsidized Stafford loans, the government would pay less money to lenders, banks would not receive as much money when students default and banks would have to pay more in fees, the Associated Press reported.
The House is expected to approve the bill, but the Senate's approval is uncertain.
By the numbers at Beloit College
$288,187 - amount of subsidized Stafford loans Beloit College gave out in 2006-2007
$21,377 - average loan indebtedness for spring 2006 graduates
$2,624 to more than $60,000 - range of loan indebtedness for spring 2006 graduates
589 - number of Beloit College students receiving subsidized Stafford loans in the 2006-2007 school year
582 - students receiving subsidized Stafford loans in 2005-2006
610 - students receiving subsidized Stafford loans in 2004-2005
$96,979 - median family income for all Beloit College students
$62,466 - average family income for students who received the subsidized Stafford loan in the 2006-2007 school year
Source: Cynthia Gray, director of institutional research and planning at Beloit College
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