Past, Present & Future of Student Loans
by Juan Lachapelle | published Oct. 6th, 2013
41, 6.41. As of this past summer, these are the new interest rate percentages for undergraduate, graduate and PLUS loans, respectively. The RIT Office of Financial Aid and Scholarships has its own chart showing past interest rates for subsidized/unsubsidized direct loans starting from 2008, the highest being 6.8 percent.
According to the Washington Post, President Obama signed a bipartisan bill that lowered interest rates starting this current school year and set new caps to limit how high the rates can go: 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for PLUS loans. These caps were set in order for the rates to grow steadily as the economy improves.
The bill is one of many proposals that Obama is implementing in order to reduce the burden of loans on future and current college students. According to the New York Times, the President has plans to implement a rating system for colleges based on measures such as tuition, graduation rates, debt and earnings of graduates and percentage of lower-income students attending. If approved by Congress, he hopes to implement it by 2015. The idea behind the proposal is to “base federal financial aid to students attending the colleges partly on those rankings,” according to the New York Times. New repayment plans such as “pay as you earn” are also being taken into consideration as new proposals are brought up.
Verna Hazen, assistant vice president for financial aid and scholarships, says the lowered rates were long awaited since past caps had expired and many proposals were created in hopes of changing the caps once again. “Some of them were not attractive proposals at all, so we were all very concerned about what would happen,” said Hazen.
As various loan reforms are taking place, some private companies are opting out of the loan business altogether. According to Forbes, JPMorgan will be notifying colleges, starting October 12, that it will stop accepting applications for student loans. The bank believes there is “no major growth potential for the unit as competition from the federal government increases.” Other private student loan providers, like Sallie Mae, are still sticking with the business.
As new and old students alike are getting adjusted to the new school year, student loan reforms are often overlooked and confusion can arise from things like loan repayment to general requirements and even laws. Hazen stressed the importance of knowing what goes into your loans and whatever you sign. “We try to put [information] everywhere we can and put it in such a way that students can find it,” said Hazen. “They are responsible for reading it but [financial advisors] are responsible for answering questions if they have them.”
However, not all students are unaware of the financial risks involved with going to college. Creg Bryski, a first year Engineering Exploration major, expressed his understanding of the ongoing change, but was unsure of how it will impact his college career and beyond. “Nothing is ever set in stone. As soon as I get out of here, there’s no guarantee I will get a job to pay all the loans back,” said Bryski. “What’s going to happen when I don’t?”
Michelle Catalfamo, a third year Motion Picture Science major, felt positively about the bill, but seemed concerned with loans getting harder to obtain. “With my limit, I might have to find another one during my senior year,” said Catalfamo.
This ongoing battle is currently being debated in Congress, discussed in the Department of Education and will ultimately fall down onto the school and its students. Changes are actively taking place, and as a student it isit is aing is ever set in stone, good practice to keep up to date on future loan policies and laws.
llustration by Katherine Dayton