Interest rates on federal student loans are set to double July 1st, jumping to 6.8 percent from the current 3.8 percent. That means incoming college freshman could end up paying thousands of dollars more than their older peers for the same loans. Incoming UMass Amherst students and their parents are preparing for the added cost.
Last year Congress and the Obama Administration reached an agreement to extend the current interest rate on Federal Stafford loans for a year. But unless Congress acts, that extension expires July 1st. North Attleboro, Massachusetts resident Audrey Bradley was at UMass Amherst Friday afternoon with her son during the university’s admitted students open house. She says student loans are a deciding factor in her son’s college choice.
“I look at it two-fold: if I can avoid taking out loans for my kids, and having them take out laons, I will do it, and that will alter the schools we’ll look at and what we’ll accept.”
The rate hike will only effect students taking out new subsidized loans while current students with outstanding loans will not see their rates increase. 18-year-old Zach Beacher has been accepted to UMass and says higher loan rates will make paying for school more difficult.
“It’s a little bit discouraging, I’d really appreciate it if the prices had stayed the same.”
The budget cuts known as the “sequester” are also limiting the amount of federal need-based grants and work study grants available to college students. President Obama is expected to release his budget proposal in the coming weeks, but neither party’s proposal in congress has set aside money to keep student loans at their current rate.