President Obama signed a bill on Aug. 5 which will restore lower interest rates for federal student loans.
The measure obtained bipartisan support among members of Congress after interest rates for subsidized federal loans doubled in July. Lawmakers were aware that student loan interest rates would skyrocket if a compromise was not reached by July 1, but Congress failed to act before the deadline.
Although Republicans and Democrats continue to differ in their beliefs about how loan rates should be set in the future, both parties agreed the doubling of student loan rates would be detrimental to the financial well-being of college students.
"The cost of college remains extraordinarily high. It's out of reach for a lot of folks," Obama told the Associated Press. "We've got to do something about it." Obama added that he considers the Aug. 5 bill to be the first step in a broader plan to make a college education more affordable.
House Speaker John Boehner, R-Ohio, disagrees with Obama's future plan for federal student lending, but is encouraged by the bipartisan cooperation in restoring interest rates.
"With the stroke of a pen, we've now officially taken politics out of student loans," Boehner told the Associated Press.
Under the new law, student loan interest rates will be based on the 10-year Treasury note. Loan rates may vary from year to year, but will remain constant for the life of the loan. For the upcoming academic year (July 1 to June 30, 2014), interest rates for federal student loans will be as follows:
Direct loans to undergraduate students (subsidized and unsubsidized) are fixed at 3.86 percent, whereas unsubsidized loans to graduate and professional students are fixed at 5.41 percent. Direct PLUS loans (for parents) are fixed at 6.41 percent, and Perkins loans are set at 5 percent.
Alisa Jacobson, a junior majoring in History, is one of thousands of Bison students who took out student loans to pay for school.
"It just means a whole lot less stress when paying them back," she said.
The legislation will cover over 18 million student loans this fall, totaling about $106 billion. The restored rates are estimated to save the average undergraduate $1,500 on interest charges this year alone.
Another result of the Aug. 5 bill is that the lending of student loans is being transferred among several different servicers across the country. At NDSU, the Department of Student Financial Services has contracts with several of these lenders. Because Student Financial Services transfers the loans to their contracted servicers, the Department may change who distributes a student's loans.
Since these servicers are in charge of loan repayment, it is important for students to know who is in charge of their account. To determine the name of your servicer and the amount of your federal loan debt, visit www.nslds.ed.gov. For more information about direct loan servicers and loan repayment, go to http://mappingyourfuture.org/paying/loanservicers.htm or contact your loan servicer directly.
