Interest rates for need-based student loans dropped on July 1, but an expert warned that the lower costs won’t last.
Government-subsidized student loans before July 1 had a 6.8 percent interest rate, but now anyone receiving a loan for the 2008-2009 school year will have an interest rate of 6 percent for that loan.
“Interest rates should reduce a little each year,” said John Curl, U director of financial aid. “Once it reaches the bottom (of the interest rate cuts), it will bump back up to the 6.8 percent. This is just a temporary thing.”
The College Cost Reduction and Access Act, which the U.S. Congress signed into law in 2007, makes four annual interest rate cuts for need-based student loans.
“(The act was intended) to provide some much-needed financial relief to students working very hard to pay for college,” said Rachel Racusen, Democratic spokeswoman for the House Committee on Education and Labor.
The act cuts interest rates in half, from 6.8 percent to 3.4 percent, over a four-year period.
“The temporary interest rate phase down is, at best, a band-aid on a gaping wound,” said Alexa Marrero, Republican spokeswoman for the committee.
Curl said this annual reduction is what Congress is doing in lieu of a reauthorization of the entire student loan program.
“Because they have not been able to take on the whole program, they are taking on bits and pieces of it at a time,” Curl said.
David Bohnet, a senior in theatre and Spanish who has subsidized and unsubsidized student loans, thinks the interest rate reduction is good, but doesn’t solve the overall problem.
“Someone is trying to make the situation better. This helps us right here and now, but what is this going to do overall?” he said. “Is this just a quick fix or is this going to help the next generation of students that come to college? If we aren’t concerned about that, then we aren’t trying to fix the real problem.”
According to the 2007-2008 Common Data Set, almost 5,500 of more than 21,000 degree-seeking undergraduate students at the U were awarded need-based financial aid. Undergraduate students were awarded more than $31 million in need-based loans at the U during the same academic year.