Students who took out federal loans to help pay for college this year are getting a break in interest rates, with one of several changes made to federal loans, state grants and programs.
Over the summer, Congress passed the Bipartisan Student Loan Certainty Act of 2013 which ties student loan rates to the Treasury bill, instead of an arbitrary formula set by Congress, said Carolyn Zehren, director of the financial aid office. Rates were set to go back up to 6.8 percent on July 1.
Under the Act, interest rates will be set in June for the following award year, which begins July 1 of the same year and goes through June 30 of the following year. Each loan will have a fixed interest rate for the life of the loan.
“This means that students, now and in the future, will have a more reasonable basis for the interest rate,” Zehren said. “The interest rates are more closely tied to the economy. If the Treasury bill rates go down, then the interest rates for student loans will go down, but they can go up, too.”
Rates for the 2013-14 loan term for undergraduate subsidized and unsubsidized loans are 3.86 percent. Graduate student unsubsidized loan rates are set at 5.41 percent for the term, and direct PLUS loans are set at 6.41 percent, according to the federal student loan website, studentloans.gov.
Another change made to federal financial aid this year is a change to the time students are allowed to take out loans. Not only is federal aid cut off at a certain dollar amount, it is now also limited to 150 percent of the time it takes to complete a bachelor’s degree, or the equivalent of six years, Zehren said.
“There hasn’t been any loosening of financial aid, in fact, it’s just the opposite,” Zehren said. “(These changes) have been made to encourage timely completion, to encourage students to come to college, finish in a reasonable amount of time and then move out into the workforce.”
A change that has been made on the state level is the Minnesota Dream Act, which allows undocumented students – those who are not legally in the United States as a US citizen – to receive in-state tuition at MnSCU colleges and at the Twin Cities and Duluth campuses of the University of Minnesota, Zehren said. It also makes them eligible for programs such as the Minnesota grant program.
“This is a significant change for that type of student who would otherwise virtually have no resources that would help them pay their education expenses,” Zehren said.
More information about student loans, interest rates and grants can be found on the MSUM financial aid web site in the 2013-14 Award Guide.
BY KAYLA VAN EPS