By: Syd Bickers
You will be paying twice as much interest on next year’s student loans, if Congress does not vote to extend the current rate by July 1, when the rate is set to jump from 3.4 percent to 6.8 percent.
The change will hit over half of Milligan’s students, according to Milligan’s Vice-President for Finance Jacqui Steadman.
The hike in interest is due to the waning of the College Cost Reduction and Access Act that was signed Sept. 27, 2007. The act gradually cut the 6.8 percent interest rate of Stafford subsidized loans to 3.4 percent. It is set to terminate July 1, 2012. Congress may extend the bill, if they act before the deadline.
“I would not be surprised to see the lower rate extended – I’m just not sure of the timing,” President Greer wrote in an email Feb. 1 from the Council of Christian Colleges and Universities conference in Washington D.C.
If Congress does not extend the act, rising interest rates will be the only direct repercussion and they will only apply to under-graduate students applying for 2012-13 Stafford subsidized loans.
Graduate students will no longer be eligible to receive subsidized loans after July 1, 2012. The federal government will still give the $9.7 million Milligan usually receives on students’ behalf.
According to the 2010-11 statistics, figured by Steadman, 54 percent of students (641 of 1,140 students) took out subsidized Stafford loans. The average amount loaned to one student during four years of study is $15,296. Payback time is 10 years.
The graph to the side shows the difference between the total payments of $15,296 at 3.4 percent and 6.8 percent interest. The lower rate’s cumulative payment is $17,264.31 including $1,968.31 in interest. The higher rate’s cumulative payment is $20,106.71, including $4,801.71 in interest.
In his State of the Union address, President Obama encouraged Congress to extend the act.
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