Students at Fresno State carrying the weight of heavy loans and financial aid received positive news this summer when Congress passed legislation keeping loan rates low.
These changes primarily impact students who are just entering college.
Student loan interest rates doubled from 3.4 percent to 6.89 percent, when Congress failed to reach an agreement to maintain the previous rate by the July 1 due date.
To curb this increase, the Bipartisan Student Loan Certainty Act of 2013 was signed into law by President Barack Obama on Aug. 8, lowering the rates to 3.9 percent. The new bill also places a cap on interest rates, ensuring maximum rates of 8.25 percent for undergraduates and a 9.5 rate for graduates.
This has come as a relief for many students and also for the Financial Aid Department Director Bernie Ogden.
“I personally was very happy when this bill came out, lowering the interest rate,” Ogden said. “Would I have liked it to be better? Yes, I would. I would like it to stay at 3.4.”
Ogden said that with the shaky economy around the country hurting budgets, “to get 3.9 was probably a good concession for our concern.”
The student loan interest rate is tied to the Treasury bill rates, so future interest rates may differ. Treasury bill rates are adjusted quarterly, but Ogden said the rates do not have drastic fluctuations. The student loan rate will only change on a yearly basis. Students do not have to worry about changes while they are in school.
Even if the government did not pass the new bill, students would still be taking loans but shoulder a higher interest rate.
“I don’t think having it tied to the [Treasury bill rates] will have a dramatic effect because, bottom line, even if the loan rates were at 6.8 and students needed the money to get the education, they would still take the loan,” he said. “So the fact that they do not have to pay 6.8 but they’re paying 3.4, it’s better for them.”
Sophomore Karina Cooke was one of the many students lining up at the financial aid office in hopes to get a loan. “That’s really cool,” Cooke said about the lowered interest rate. “That’s really good because a lot of us, when we graduate, are going to have a hard time paying for it.”
Junior Janelle Chao had the same opinion. “It saves them a little bit more money and gives them a little more time to figure out how to use their money if they’re going beyond their bachelor’s [degree],” she said.
Despite the good news, Ogden advises students to be more aware of the interest rates. He feels that students do not look far enough into the future to be aware of the repercussions of taking on too much loans.
“I don’t think they think enough about what the interest rate is because they don’t have to make payments,” Ogden said. “Unfortunately, sometimes we live in the ‘now’ and we don’t think of the future.”
Ogden said that the loans are there to help students complete their higher education and are a great investment in them and their future. However, he also advises students to be prudent and to only take the amount necessary.
“Take what you need, and learn to live with just what you need,” he said. “That’s always been my advice. No matter what the interest rate is, or how the interest rate is calculated, take what you need. Don’t take everything that’s offered.”
Another result of the new bill is the 150 percent limit on students’ education length, Ogden said. For example, Fresno State is a four year institution. With this limit, students are allowed to receive six years of loans. So, students are ultimately given six years to complete a four year education program, Ogden said.
There are students who have been studying for seven or eight years. Ogden feels that this policy motivates students to graduate in a timely manner.
“When you have to start paying it for yourself, it becomes a different response,” he said.
Ogden emphasized that this new policy is not intended to rush students through college. The extra 50 percent is to ensure students are able to fully experience college within reasonable expectations.
“The outcome of the bill and its intent is to encourage students to go through the program and graduate more quickly,” Ogden said. “As students move through the campus in a more rapid manner, then the people coming in won’t have as much trouble graduating. They’ll be able to get their class, and then everything will flow much smoother.”