President Obama worked with Congress to approve changes to the Stafford loan rates. As I noted earlier, due to the delay in this deal being worked out, the college rate loans have doubled from 3.4% last year to 6.8% this year. However, due to the deal now reached with congress, college financing became affordable again.
Luckily the new student loan fixes the issue once and for all as this bill has no expiration date. However, it has become more complex than before.
The interest rate is now pegged to the 10 year treasury. This means as the US economy does well, the treasury interest rates will raise and so will the interest rates charged on student loans. However, there is cap on the increase. Here are the details:
Undergrad, subsidized loans – 3.86%
Graduate, subsidized loans – 5.4%
Parent direct PLUS loans – 6.4%
The interest rates will be adjusted 1st day of month of June every year with max cap of
8.5% for undergrad, 9.5% for grad and 10.5% for PLUS loans. The details of how the rates are determined, the caps etc. are in this bill.
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