Hey Classmates,

There has been a lot of buzz about student loans lately due to the recent passage of the new student loan bill. I wanted to take a blog post to break this thing down in layman’s terms..because that is hard to find on the internet and I feel like its important.  So here we go.

The New Bill

The new bill states essentially that the rates on our student loans are now tied to the rate of the Governments Treasury bond, which is how the government loans money from us..hope that makes sense, if not click on the link. So no longer are loans arbitrarily decided AND no longer are they FIXED.

WHAT DOES THAT MEAN!!??

This means that our loan rates can and will change from year-to-year, based on the treasury bond–which is basically based on the strength of the economy. Meaning that as the economy strengthens, our rates go up, until they hit a ceiling (Direct- 9.5%, PLUS- 10.5%).

The numbers:

Direct Stafford Loan (unsubsidized)

Old Rate: 6.8% —–> New 2013-2014 Rate 5.41%

GradPLUS Loan (unsubsidized)

Old Rate 7.9% —–> New 2013-2014 Rate 6.41%

Don’t forget about the fees!

The one thing that NOBODY talks about with these loans is the fees. I wanted to briefly bring to light the numbers here as well. These fees didn’t change with the reform, but should still be known. Just incase you don’t know what these fees are, they are the amount of the loan that is removed before you even get the money, but you are still required to pay back the full amount, soo…they suck.

Direct Stafford Loan:  1.051%

GradPLUS loan: 4.204%!!!!!!!!!!

This means that when you pull out your GradPLUS loan you already are in the whole 4.204%…

All this basically means is for now our rates are lower, hopefully they will stay low, but they go up as the economy goes up.

Hope this is helpful, avoid these like the plague.

-Zack

infographic courtesy of: The Daily Californian