Student loan interest rates may fall

By Megan Farrell
The Collegian

The House voted Jan. 17 in favor of lowering the interest rate on student subsidized loans. The bill, if passed in the Senate, will gradually lower the interest rate from 6.8 percent to 3.4 percent over the next couple of years.

At face value, the bill looks to be very beneficial to students. However, a few things hold the benefits back.

“It will make for interesting repayment,” Financial Aid Director Maria Hernandez said.

Hernandez said if the student also has an unsubsidized loan then there is another interest rate that the student has to deal with.

The loans can be subsidized or unsubsidized. The difference between these types of loans is that a subsidized loan is only based on the financial need of the student. Unsubsidized loans are based on the remaining need of the student. The other difference is that the subsidized loan does not have to be repaid until six months after graduation.

The bill on its way to the Senate is only applied to the Federal Stafford Student Loan. Currently the fixed interest rate on the Stafford loan is 6.8 percent. If passed, the interest rate will drop to half, but not all at once. This means that if a student takes out a loan a year for the next four years starting in fall of 2007, that student will have four different interest rates to pay off when they graduate.

“All of the interest rate will lead to consolidation of the loans which will lead to yet another interest rate,” Hernandez said.

Another downside of the bill is that once the rate reaches 3.4 percent there is no guarantee that it will stay there. That is not part of the current bill in Congress; if the rate is going to stay fixed after the cut, there will have to be another bill put through congress.

Junior business major Pamuditha Mahadiulwewa has not taken out any loans. She said so far she has gotten by on financial aid but she may have to take out loans in the near future.

“I am scared about taking out a loan,” Mahadiulwewa said. She has not yet spoken to anyone in the financial aid office.

Every student who is offered a loan and accepts it is required by the financial aid office to go through loan workshops.

“First-time borrowers are specifically required,” Hernandez said. “It does not matter if they are first-time freshmen or graduating seniors.”

The workshops are offered on campus and are given by financial aid staff members and lenders from the area. They help the students understand what a loan means in terms of the campus and the lender explains the lending process.

Mahadiulwewa said if she took out a loan, she would benefit from the workshop, especially since she does not know much about it now.

The workshops are also offered online. However, they are not offered as frequently online as they are in person. “We feel the student will benefit more from the presentation given at the workshop,” Hernandez said.

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