In the News: Stafford Loans
Stafford student loans have been a hot topic in the news lately (Thanks in no small part to President Obama’s recent appearance on the Late Night with Jimmy Fallon program where he sang a slow-jam in their dedication!) If you’re wondering why everyone’s talking about Stafford loans, here is a basic rundown: The current rate for subsidized Stafford loans is set to double from 3.4% to 6.8% on July 1st. Republicans and Democrats would both like to see the rate stay at 3.4%, but they are having trouble coming to terms on how to pay for the measure.
If Congress can’t agree and the current rate expires, there are some important things to remember about the rate hike. First, if you are one of the seven million students that currently has a Stafford loan, or if you get one before July 1, 2012, then your rate will be unaffected. The higher rate only affects students who are taking out loans after July 1st. Second, graduate students will no longer be eligible for subsidized Stafford loans. While less palatable than subsidized Stafford loans, grad students will still be able to take out unsubsidized Stafford loans, which will stay the same at 6.8%.
For those of you who plan on paying off some or all of your college expenses using Stafford loans, the possibility of a rate increase comes as an unpleasant surprise. The implications for you will differ depending on your loan amounts and repayment plans, but it will surely complicate your financing strategy. As always, we recommend that you exhaust all the non-loan resources you have at your disposal, whether it is scholarships, grants, etc.
If you need a loan, a rate increase brings into question whether Stafford loans remain preferable to private student loans. Federal loan options usually have more flexible terms than private lenders, but if you’re able to find a private loan with a significantly lower interest rate, then that could be a suitable alternative. It’s very important that you research the various loan options out there so you can get a complete idea of what there is to choose from. If you want to get the latest rates from an assortment of private lenders, check out the Student Loan Marketplace.
Good luck, and let’s hope that Congress comes to an agreement before the deadline!