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The Real Deal: Changes to Student Loan Rates and Rules
SARATOGA--While most college students enjoy a few more weeks of summer vacation before heading back to school, they're mindful of some changes that may impact how much they pay for that education.
Most students were wearing their college colors with pride at the Saratoga Racetrack on Friday for College Day but how much they're paying to be able to do so, is never far from their mind. "It carried a lot of weight, definitely...especially since I'm going to Cornell, it's kind of expensive but Im hoping a lot of the scholarships will help me out," Cassandra Madulka tells CBS6. Marita Breen from Waterford who is a student a Russell Sage College has similar concerns, "I try not to worry about it now because I really do want to enjoy what I'm doing but it is always in the back of your mind--I can get a job afterwards but how well is it going to help me," she says
Private interest rates on college loans have been fluctuating for years and now federal rates are changing too. As of this month, any new loan will have a higher rate but it will be fixed throughout the life of the loan so students and families can better plan. Congress changed the law last year to tie interest rates to the 10-year treasury rates and add a small margin. "I feel like once we're already in there, it shouldn't be changing but it is and its hard to keep up with because we're trying to study and what not but we also have to keep up with this whole other thing that's just going to follow us for the rest of our lives," Breen says.
Another change as of July, the "Pay as you Earn" program will be expanded. Those with new loans will be eligible for an income based repayment plan after graduation that caps the payments at no more than 10% of his/her income. "When you're just getting out of school you have to figure out how to manage your money and when you don't have to put so much toward your loans, so, I think it'll help you out, Madulka says.
An additional change to the rules may offer relief for those who are in default on federal student loans. Those borrowers will now have more options to get the loans out of default. One of which would be to make 9 on-time payments of a reasonable amount agreed upon by the borrower and the lender.