This past July, the Federal Reserve raised interest rates on the Stafford Federal Student Loans from 5.3 percent to 7.14 percent on previous loans and to 6.8 percent on new loans, according to the St. Louis Business Journal.
At Cabrini, 94 percent of the full-time undergraduate students who filled out a Free Application for Federal Student Aids for financial aid received a Stafford Loan, according to Mike Colahan, director of financial aid.
“Where it’s going to impact students is on the repayment side,” Colahan said. “It doesn’t affect the amount of money that they get to pay for the college, and it doesn’t impact any of the rules that govern the rules of the Stafford Loan program.”
The new rate of 6.8 percent on new, first-time loans is a fixed rate. Previous loans will carry a rate of 6.54 percent during the in-school and six month grace period and then will have a 7.14 percent rate for repayment, according to Accessgroup.org, a nonprofit loan specialist.
“What happens with the Stafford loans, even though the students aren’t paying anything right now, they are accruing interest,” Dr. Mary Harris, assistant professor of business administration, said.
The Stafford Loan offers a six-month grace period before students need to start repayment. But after that period, payments have to be made every month.
Students Michael Pio, a junior English and secondary education major, and Josh DeCoste, a sophomore history major, both knew about the hike in interest rates. DeCoste learned about the raise through an e-mail.
“I was not happy about it all. I am already in so much debt and now I will just have to pay more when I get out of school. It’s a pain,” DeCoste said.
Colahan advises students to start making payments while they are still in college and during the grace period, even if it is a small amount.
“The best advice that I have is.you can make payments on the loan while you are in school there are no penalties for paying down early,” Colahan said. The more money a student pays before hand, “the less interest overall you are going to have to shell out for.”
Harris said, “My best advice would be to consolidate, to try not to defer paying back, if you possibly can, because again, it’s accumulating interest and to pay on time because it significantly affects your credit and your future potential borrowing.”
Pio, who knew about the hike in rates because all his loans are in his name, is already taking measures to keep his monthly payments low. Pio said, “I consolidated because I still have a year left and it’s going to go up two more times, so I’m set now,”
The rates went up in July, but some students still aren’t aware or are just receiving the information now. Lindsey Bullick, a senior elementary and early childhood education major, didn’t know about the new interest rates on the Stafford Loans.
“I think I am going to be paying my loans off till I am 80, so I feel like with all the money I already owe, that 2 percent won’t matter,” Bullick said.
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