STUDENT LOAN COSTS INCREASE

On June 29, 2012 the House of Representatives adopted H.R 4348 Surface Transportation extension Act of 2012 Part II. This bill included language to prevent the doubling of interest rates on federal student loans. While the passage is good news for student loan interest rates, it did increase costs of borrowing through other provisions of the bill that have received less attention in the news.

A Washington Post article highlighted two noteworthy provisions that affect both under graduate and graduate students. Previously, undergraduate students were not responsible for paying interest on federal loans during the six months following graduation. Now interest will be charged during this period, adding to the amount they must repay. In a separate change that the Congressional Budget Office estimated would save approximately $18.1 billion over the next 10 years, the graduate subsidized loan program would be eliminated. Previously graduate students under the program would not be charged interest while in school or during the post-school grace period. Now interest will be charged on federal loans while graduate students are in school and during the grace period.