Student Loan Rates Kept Low in a New Jobs Highway Bill

Subsidized Stafford student education loans taken out as of July 1, 2012, will remain at 3.4 percent for one more year. The subsidy covers the interest accrued while students are in school.

The law passed July 1 to retain the 3.4 percent rate avoided the automatic doubling of the interest rate to 6.8 percent which was set to take place without congressional intervention.

The law will impact the more than “7 million students across the country” with Stafford student loans, said Congressman Steny H. Hoyer. “More than 100,000 students in Maryland will save nearly $1,000 over the lifetime of their loans by keeping rates low.”

The long standing provision had been for the subsidy to extend for six months after a student left school, thus saving loan recipients an additional half-year interest. A temporary provision in place until 2014 extends the six-month grace period loan holders have always had before payments are due. But the interest subsidy will end upon the student leaving school and will accrue to the loan.

U.S. News and World Report noted potential loopholes in the law that might allow some students to retain their grace period benefits despite these changes. The article by Katy Hopkins quotes Pauline Abernathy, vice president of The Institute for College Access and Success (TICAS), a nonprofit research organization. “It really underscores the need for students to think about their repayment options and getting into the right repayment plan before they leave school. If they’re able to get in the right plan, they won’t necessarily accrue any interest during that time period.”

Other strategies to save tuition costs are the combining of community-based two-year institutions with degree completion at more costly four-year institutions. This strategy is particularly successful in communities with top drawer two-year opportunities such as Southern Maryland has.

“All of us at the College of Southern Maryland are committed to keeping our tuition affordable, so that our students are not saddled with crushing student loans, said CSM President Dr. Brad Gottfried, “Students who begin at our college enjoy significant savings as they pursue higher education, particularly when they ladder their associate’s degree to a bachelor’s degree.”

Mr. Gottfried admits to a “bias” toward CSM, but also points out that tuition and fees cost less than $4,000 a year at the College of Southern Maryland. “Students earning their associate’s degrees at CSM and then transferring to complete their baccalaureate degrees can save an average of $28,000.”

The bill keeping student loan interest rates low also included an agreement in Congress on legislation to extend highway funding. “The bill extends highway funding, protecting nearly 2 million jobs and creating a million more, while implementing higher safety standards,” Mr. Hoyer said. “This investment in our infrastructure will give our economy certainty, help businesses grow, and support job creation.”