On Saturday, President Obama signed a Congressional short-term fix to keep student loan rates reduced for one year, but experts warn that the new measure will restrict eligibility.
The $6.7 billion student loan measure extends the current 3.4% interest rate on Stafford loans for one year, funded by changes to pension laws and a reduced length of time students can get those loans.
According to additional analyses of the student loan provision:
- Students enrolling in college for the first time after July 1, 2012 must have a high school diploma or GED to be eligible for federal student aid.
- Graduate and professional students will only be able to get unsubsidized federal loans, not subsidized ones.
- New subsidized Stafford loans issued after July 1, 2012 will accrue interest during the six-month “grace period” after students leave school.
- The “grace period” subsidy is scheduled to go back into effect for loans issued on or after July 1, 2014, according to analysis of the bill.
- Pell grants will still have a maximum grant award of $5,550, but students will only be able to use them for 12 semesters instead of 18 semesters.
Obama said the bill was helpful in preventing the doubling of interest rates on student loan rates, but it doesn't go far enough.
“The bill I'm about to sign is vital for millions of students and their families. But it's not enoug
h to just keep their student loan rates from doubling,” said Obama in his weekly radio address.
“For months, I've been calling on Congress to reform and expand the financial aid that's offered to students. I've been asking them to help us give two million Americans the opportunity to learn the skills that businesses in their area are looking for — right now — through partnerships between community colleges and employers. In America, a higher education cannot be a luxury reserved for just a privileged few. It's an economic necessity that every American family should be able to afford,” the President added.
Shane Broadway, interim director for the Arkansas Department of Higher Education, said he was pleased that a compromise was reached before the July 1 deadline.
“I certainly know those who would have been affected had a deal not been reached are relieved,” Broadway said. “Hopefully, this will allow them to continue paying off their loan and give them a chance to focus on on their family and careers and not the worry of additional costs on top of what they're already repaying.”
Still, Broadway expressed concern about the cost-shift at work at the collegiate level.
“A college education is still the best investment over a lifetime that one can make, even though there has been a tremendous shift in cost over the last several years to parents and students. In the long-term, we know it pays off.”