Congress passed a $40 billion deficit reduction package on the first of this month, the largest portion of which was a $12.7 billion cut to federal student loan programs over the next five years.
Although a number of changes are introduced in the bill, the most notable is the fixation in interest rates of both the Stafford and PLUS loans to take effect July 1, 2006. Stafford loans (variable, but currently at 4.7 percent) will be assigned a fixed rate of 6.8 percent while PLUS loans (currently 7.9 percent) will be fixed at 8.5 percent. Also included is an increase in loan limits for college freshmen and sophomores by around $1000.
"The most dramatic is the increase in interest rates that will take place July 1. Over the past few years, we have benefited from lower interest rates. Because the loans had a variable rate, if the interest rates were low, borrowers benefited. [As of] July 1, 2006 the rates will be fixed at 6.8 percent. No more benefit if the rates go down. But it does lock in a rate if rates should soar over 6.8 percent," said Jeani Narcum, Director of Financial Aid.
What this means is that at a time of ever-climbing tuition rates, it will become harder for students to repay their debts following college. Washington College's current tuition (including room, board and miscellaneous expenses) comes to $37,190, a statistic that some students said would be hard to pay without loans.
Senior Heather Whiting said, "I don't think that if this federal aid cut had occurred when I was a freshman that it would have changed my decision to come to Washington; however, it would have left me in far more financial debt that I am in now."
Whiting is currently applying to medical school, a process that she said "would have been made harder by larger undergraduate debt. The burden of trying to pay college loans while also attempting to pay future medical school loans would be stressful."
Whiting said that the current federal aid cuts are upsetting: "I would like to think that the government and the country would want to support secondary education."
Senior Teresa Endicott said, "I don't think that the raise in cost of federal aid should be the route taken because a lack of college education results in a lower standard of living. If people can't afford education or the loans, they will give up education and resort to lower-paying jobs. When this occurs it affects the future of our country as a whole."
This bill has recently passed through both the House and Senate and though it does not go into effect until President George W. Bush signs it, he is expected to do just that once it reaches his desk.
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