You probably heard that the government temporarily stopped interest rates on new subsidized Stafford loans from doubling to 6.8% yesterday. But other student loan changes still went into effect—and they may cost borrowers money too.
Here’s a quick look at the 3 other updates that went down.
- TEMPORARY CHANGES TO THE GRACE PERIOD
Subsidized Stafford loans come with a 6-month grace period. During that period:
- No payments are due.
- The government pays any interest accruing on the loan (the “interest subsidy”).
Yesterday, these loans lost that interest subsidy. (However, there are still no payments due.)
This change only affects loans disbursed between July 1, 2012, and June 30, 2014. If you borrowed subsidized Stafford loans before then, your grace period keeps its subsidy. However, if you’re borrowing these loans this fall, the government won’t pay your interest during those 6 months.
- GRAD STUDENTS LOSE A FUNDING OPTION
Grad students, you don’t have to worry about subsidized Stafford loans losing their interest subsidy. In fact, you don’t have to worry about these loans at all.
That’s because, as of July 1, you can no longer receive subsidized Stafford loans.
Now, there are a couple important things to keep in mind about this change:
- Limits for Stafford loans to grad students stay the same—you can borrow just as much in total federal loans as before.
- You’re still eligible for unsubsidized Stafford loans.
So, this won’t affect your ability to fund your education. However, it will affect who’s paying the interest on new Stafford loans you take out. That interest is now always on you.
- NO MORE UPFRONT INTEREST REBATES
The Direct Loan program offers borrowers who make their first 12 monthly payments on time an upfront interest rebate of 0.5 percent of the loan amount (for Stafford loans) or 1.5 percent (for PLUS loans).
Loans first disbursed on or after July 1 will no longer receive this benefit.
This change does not affect the 0.25 interest rate reduction that Direct Loan borrowers receive by using auto-debit for their payments.
How will these changes affect your ability to manage your loans? Let us know in the comments.