The Journal

Issue date: 9/4/08 Section: News

Media Credit: Stew Smith

Last fall, Congress passed the College Cost Reduction Act of 2007, which will lower the interest rate on Stafford loans during the next three years.

Introduced by U.S. Rep. George Miller, D-Calif., the legislation reduced the interest rates on subsidized Stafford loans for undergraduates. The rate reduction will continue until July 2011. The fees associated with these loans will also be reduced, said Jon Gruett, director of financial aid at Webster University.

As of July 1, 2008, the interest rate on subsidized Stafford loans was fixed at 6 percent. According to the new legislation, each subsequent July 1, the interest rate will decrease on an average of 0.87 percent until 2011, when the rate will reach 3.4 percent.

DJ Pratt, a senior political science major, was pleased to see the interest rates on his most recent Stafford loans drop. He expects to owe about $26,000 in Stafford loans by the time he graduates.

"The less money I have to pay back the better," Pratt said.

Even small reductions in interest rates are beneficial, especially since the average student graduates with more than $18,000 in loans, Gruett said.

If a student takes out the maximum loan amount of $7,500 for this academic year, he or she will pay $9,991. The same loan taken in 2011, with an interest rate of 3.4 percent, would cost $8,857 to pay back. If it takes 10 years to pay off the loan, the student will have saved $1,134.

"Obviously, any time interest rates go down it will be helpful to students," said Gruett.

LeeAnn Tapscott, a senior media communications major, was not aware of the changes in interest rates, but was pleased to find out about them. She said she feels that the government can always do more to help students out and agrees with Gruett that any little bit helps.

Tapscott said that the lower interest rates will make it easier for her to pursue graduate school in the future and says she thinks it will do the same for others.

Similarly, Gruett said that the lower interest rates will make students more comfortable with taking out a loan.

While the College Cost Reduction Act is good news for students, they should also be aware that the interest rates could return to 6.8 percent in 2011, said Gruett. Congress could choose to extend the act, pass new legislation or let it expire.

The financial aid office has not made an official announcement about the interest rate changes, but students are made aware of them if they come in for an appointment said Melissa Hogan, a financial aid counselor. Furthermore, Gruett said that students applying for financial aid are required to go through entrance and exit counseling and are made aware of interest rates at that time.

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