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Interest rates have increased from 3.4% to 6.8% on federal subsidized Stafford student loans, which may cause students to reconsider how they will pay it back after they graduate.
Vicki Mattocks, director of the office of student financial aid at Missouri State University, explains that the increase will only apply to those taking out loans after July 1.
“Let’s say we’ve got a junior in school. That junior had two years of a 3.4 subsidized Stafford loan. The Stafford loan that they take out this year will increase to 6.8, so it won’t affect their past balances, it will affect anything they borrow in the future,” Mattocks says.
Mattocks estimates that around 7,500 MSU students borrow money each year. Aside from scholarships, MSU offers all federal aid, which includes the Pell grant, Perkins loan, work-study, and others, but the funding is limited.
“Our sources for making funding available to students has not increased. In fact, they decreased it because the government has cut out a couple of programs in the last couple of years, and the amounts we can offer from those sources have not increased, so there’s not much we can do to make a difference for them,” she explains.
Not only are public university students affected, but private college students are too as those students also receive federal aid.
Lori Barnes, director of financial aid for the College of Continuing Professional Studies at Drury University, says many students at Drury take out loans to pay for college—which includes traditional day school students and older students who are continuing college.
“We went back and pulled a report for our last academic year, so fall and spring, the 2012-2013 school year. And in our day school, we had 633 students that had loans and in our CCPS, the College of Continuing Professional Studies, we have 1,840 students who had loans,” Barnes says.
Congress could still reach an agreement that includes retroactive protection for students who borrow after July 1.
In a statement, U.S. Senator Roy Blunt (R-Missouri), said on Monday that Congress needs to pass a bipartisan, long-term solution as soon as possible that will allow students to become more certain of taking out loans and that will give them access to lower rates.
For KSMU News, I’m Kaitlyn Schwers.