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  • Will loans be easier on students once Obama signs the deal?
  • Posted By:
  • Karen W.
  • Posted On:
  • 10-Aug-2013
  • Thousands of dollars will be saved by students getting into college this fall in terms of student loan interests. Once the bipartisan compromise is signed by our President, loans should cost them much lesser.

    Ending a spate of intense negotiations, President Obama has finally brought to the table a deal to lower interest rates for students. This is indeed welcome news for students heading back to college. On this year’s student loans, at least 11 million undergraduates can save at least $1500 on interest charges.

    Interest rates on loans are linked by the legislation to the financial markets. At this point of time, government is able to borrow money at a cheaper rate which means students benefit from lower rates. In the coming years, if there is a significant improvement in the economy, cost of borrowing may increase for the government which will in turn be passed on to students.

    As there was no way Congress could keep the existing 3.4 percent on the Stafford Loans, the rates on these subsidized loans doubled to 6.8 percent in July. Presidential and congressional action has made sure that the rates do not stay at a constant 6.8 percent.

    Through the 2015 academic year, students will greatly benefit from this compromise. If the next 10-year Treasury note estimates by congress re right, interest rates will continue to climb further.
    This fall, interest rates for undergraduates would be fixed at 3.9 percent for both unsubsidized and subsidized loans. For graduate students, student loan interest will be 5.4 percent and for parents 6.4 percent. Loan rates will be fixed for a year and are likely to increase every year.

    Undergraduates will not however be paying anything more than 8.25 percent, parents not more than 10.5 percent and graduate students not more than 9.5 percent. These limits will not be reached before the next 10 years according to the congressional budget office estimates.

    There were discussions about how to consider a broader approach to contain skyrocketing costs by the officials during the passing of the bill. The discussion also included possible scrapping of deal this fall when the Higher Education Act will be rewritten.

    According to Jay Carney, the White House spokesman, people, a lot has to be done for people trying to edge into the middle class and for middle-class families looking for affordable college, even after this vital bill has been signed into law.

    In a short term perspective, an encouraging factor is that housing, books and tuition will be less expensive for students.  Totally about $106 billion, this legislation will cover over 18 million loans this fall.

    Deficit will be reduced by at least $715 million over the next decade by the bill according to the estimate released by the Congressional budget office. Federal loans by the time will cross $1.4 trillion. Hopefully this positive move will spur future programs that will help control rising tuition costs and bring student loan situation under control before it is too late.







 

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