On Friday, June 29, the House of Representatives passed a transportation bill that includes a reform on government-subsidized student loans. Here are five things that you need to know about the student loan reform.
The bill will only apply to government-subsidized loans, such as the subsidized Stafford loan. Private student loans through other forums are not included in this bill.
Without the one year extension, interest rates were set to double in days. With the extension, interest rates will stay set for the next year, which will make a huge difference for nearly 8 million Americans. Interest rates will be frozen in their current state for government-subsidized student loans.
Interest rates are approximately 3.4%. Without the extension, the interest rates would have doubled to a whopping 6.8%. Not only would this increase the burden on repayment, but it could also extend repayment period for many people.
Hopefully the extension will raise awareness about the rising cost of higher education and the massive amounts of debt that students and their parents are taking on. This is a small victory for students, but a lot of work remains.
Not a Permanent Solution
Although this extension will help millions of Americans, it is not a permanent solution. Many factors will contribute towards a permanent solution, such as a significantly improved economy.
What can you do this year to make a dent in your student loans? Many loan servicers, such as Sallie Mae, offer a slight discount if you sign up for automatic debit from your checking. Look into loan forgiveness programs. If you can pay more than the minimum amount every month, then by all means do so. Not only will this help you chip away at your student loan debt, but it will help stave off a little bit of the extra interest you are repaying.
If you think that the interest rate is small, take a look at the bigger picture: how long are you scheduled to repay your loan(s) according to your servicer? Do you really want to keep paying for your college education when you’re in your 50s? How much money will you have given the servicer on top of your loan? Scary, isn’t it?!
Best of luck to everyone currently in repayment. Let’s use this year of static interest rates on our subsidized government loans and make a dent in our repayments!